View Full Version : Is this the start of the long predicted housing crash?
http://news.bbc.co.uk/1/hi/business/6114330.stm
Mortgage repossession orders made by courts in England and Wales are at a five-year high, indicating that more homeowners are under financial strain.
More than 24,000 orders were approved in the past three months, a 22% increase on the same period in 2005.
The number of properties actually repossessed also hit a five-year high earlier this year.
Experts warned the trend of rising repossession orders would continue with interest rates likely to rise soon.
Most 'experts' expect interest rates to rise by 25 basis points next Thursday so that will only make matters worse.
Or will it simply be a case of 'normal' people losing their houses only for investors to snap them up at reduced prices and then put them on the rental market?
It will be interesting to see how it all pans out considering the price boom that is expected from holding the Olympics here in 2012.
Well as house prices have risen steadily this year and most experts predict the same next year - lets hope they just rise slowly along the lines of inflation and wage increases -
A housing crash will do no one any good.
A housing crash will do no one any good.
Might be a silly question but won't it be great for first time buyers? Give them a chance to get on the market?
...
A housing crash will do no one any good.
Ahem...think about it ;)
Might be a silly question but won't it be great for first time buyers? Give them a chance to get on the market?
I doubt it will make any difference
all it will mean is property sharks will snap them up and put them out to rent before first time buyers have a chance to get their paper work sorted.
We go into recession - a few more houses are reposseed - lenders will not lend - no one will sell as the house is worth less than when they bought it - the whole ecomomy slows down.
Not good for anyone.
AdminSpod
03-11-2006, 16:54
A housing crash will do no one any good.
Except all those young people who can't afford to get on the housing ladder and the very rich who will be able to afford to invest in low cost property after the crash ...
AdminSpod
03-11-2006, 16:56
We go into recession - a few more houses are reposseed - lenders will not lend - no one will sell as the house is worth less than when they bought it - the whole ecomomy slows down.
Not good for anyone.
That happened for a while after the 89 slump, but after a year or two things began to pick up again and it did benefit the first time buyers then.
A housing crash will do no one any good.Yes it will. It'll mean that the first time buyers who currently can't afford to buy will be able to buy a house :clap:
We go into recession - a few more houses are reposseed - lenders will not lend - no one will sell as the house is worth less than when they bought it - the whole ecomomy slows down.
Not good for anyone.
That's one scenario.
An alternative could involve all of those with lots of disposable cash purchasing additional properties for investment purposes.
From my experience there are a huge number of 'investors' in London, both domestic and foreign and they are always looking for a bargain in the housing market.
We lost out to them several times when we started looking to purchase early this year.
Except all those young people who can't afford to get on the housing ladder and the very rich who will be able to afford to invest in low cost property after the crash ...
Maybe the rich will be able to benifit - But first time buyers - doubt it last time there were no houses on the market as no one would sell - rental prices went up - but first time buyers were not helped -
Much better to have stable affordable housing
I doubt it will make any difference
all it will mean is property sharks will snap them up and put them out to rent before first time buyers have a chance to get their paper work sorted.But won't they lose a lot of value in the houses that they currently own and rent out? Surely they'll be more worried about that than adding to their own portfolios :notworthy
no one will sell as the house is worth less than when they bought it .Yes, but, the majority of people won't have lost anything real will they. The only thing they will lost is the imaginary gain that they've lost on the value of their houses.
Roll on the crash!
cjanderson
03-11-2006, 17:00
We go into recession - a few more houses are reposseed - lenders will not lend - no one will sell as the house is worth less than when they bought it - the whole ecomomy slows down.
Not good for anyone.
well not everyone bought their houses in the last year, most people have had them for ages and seen them sky rocket in value so would just be a paper profit they have lost.
If they fell and more people were able to buy thats a good thing, though it appears that most people are able to buy at present and things get snapped up very fast, even at stupid levels of borrowing.
I;d like to move and get a slightly bigger place but thought of going over 250k, paying extra stamp duty just makes me go WTF?? 250k for a 2 bed flat, thats like QUARTER OF A MILLION POUNDS and is :nuts:
Yes, but, the majority of people won't have lost anything real will they.
They will if they have to sell. :?:
They purchase a property now for £500K, sell it after the crash for £400K, that's a real loss of £100K.
They will if they have to sell. :?:
They purchase a property now for £500K, sell it after the crash for £400K, that's a real loss of £100K.No, like CJ has just pointed out, not everyone bought a house last year.
Lee Brown
03-11-2006, 17:06
Might be a silly question but won't it be great for first time buyers? Give them a chance to get on the market?
I don't see how a housing crash means there's suddenly lots of cheap property to buy. Surely existing owners will sit tight and ride out the crash, especially in a negative equity situation.
home_bas
03-11-2006, 17:07
If the market crashes the only people who will benefit are the rich as they can snap up more property on the cheap.
The real effect wil be a recession as people tighten their belts, which would affect the majority of the population.
So, even being in the position of wanting to buy right now, a crash may well lead to the loss of my job.
Andrew70
03-11-2006, 17:11
I think the only solution to is put something in place that makes property as an investment (maybe levied on second homes or type of mortgage for instance) less attractive.
Property magnates will always find ways to make money from the market but it would stop or reign in the casual man-on-the-street.
Home ownership for people, not pensions. (they can use that slogan for free :))
I don't see how a housing crash means there's suddenly lots of cheap property to buy. Surely existing owners will sit tight and ride out the crash, especially in a negative equity situation.
Well if the crash is linked to high(er) interest rates and an increased number of repossessions then these are the cheap properties that will be available.
Also, whether they want to or not, sometimes people have no option but to move/sell during a crash and again that results in a (relative) bargain purchase.
I think the only solution to is put something in place that makes property as an investment (maybe levied on second homes or type of mortgage for instance) less attractive.
Property magnates will always find ways to make money from the market but it would stop or reign in the casual man-on-the-street.
Home ownership for people, not pensions. (they can use that slogan for free :))
If you where standing at the election i'd Vote for you
Vote Andrew70!!
I think the only solution to is put something in place that makes property as an investment (maybe levied on second homes or type of mortgage for instance) less attractive.
At the minute it's skewed the other way in some cases.
Foreign 'investors' are exempt from paying stamp duty so when purchasing more expensive properties, they're already tens of thousands of pounds better off than British buyers.
It's an utter disgrace that the overwhelming majority of people in this country don't even come close to having the resources to buy their own home.
Just Passing
03-11-2006, 17:32
It's an utter disgrace that the overwhelming majority of people in this country don't even come close to having the resources to buy their own home.
Why? In other countries renting is the norm, what gives the population of Britain a special right?
A housing crash will do no one any good.
Except non home-owners like me!
It's an utter disgrace that the overwhelming majority of people in this country don't even come close to having the resources to buy their own home.
What do you propose is done?
It's an utter disgrace that the overwhelming majority of people in this country don't even come close to having the resources to buy their own home.
In many countries mortages are handed down from family to family - they can be for 100 years and are used to finance all major purchases.
If you can't afford or secure a mortage then you rent.
It was only post war housing and then Maggie Thatcher that gave us the buy buy buy attitude we have now. However selling off council houses for 40% of their value with no reinvestmnt has meant little affordable housing.
A mate of mine in Nottingham bought His Nans, his mum and dads and his wifes parents house all signed over to him after 3 years - with agreement theta they lived in them for maintenance only rents. Cost him about 70,000 for for 3 house worth over 23000 and that was 4 years ago - he then had the cheek to complain that he could not get a council house himself
Except non home-owners like me!
And why will it do you good.
Walter Sobchak
03-11-2006, 17:52
A mate of mine in Nottingham bought His Nans, his mum and dads and his wifes parents house all signed over to him after 3 years - with agreement theta they lived in them for maintenance only rents. Cost him about 70,000 for for 3 house worth over 23000 and that was 4 years ago - he then had the cheek to complain that he could not get a council house himself
Scum :mad:
Vulcan101
03-11-2006, 17:58
If there is a crash and the economy slows down then a lot of people in "service" jobs will find themselves out of work as companies try to keep themselves profitable. A lot of people who have gone into buy-to-let are going to get hit and those properties would be first to get dumped for a quick sale. If enough people panic not only the housing market but the whole economy
They won't be able to pay the mortgage and they will be repossessed. Those properties will then be auctioned off - in the late 80's early 90's houses were selling at auction for substantially less than the market value.
A mate of mine in Nottingham bought His Nans, his mum and dads and his wifes parents house all signed over to him after 3 years - with agreement theta they lived in them for maintenance only rents. Cost him about 70,000 for for 3 house worth over 23000 and that was 4 years ago - he then had the cheek to complain that he could not get a council house himself
I have had the opportunity to buy my mother's council house for £11K and my grandmother's council house for £3K.
I declined both of them because they're in Wales :D
And why will it do you good.
erm, because I'll be able to buy a house more cheaply...
home_bas
03-11-2006, 18:23
erm, because I'll be able to buy a house more cheaply...
Assuming you don't lose your job in the recessions which generally accompany a crash...
Even as a FTB'er I don't beleive a crash is good, but a sensible slowdown would be nice.
I don't beleive we have a right to home ownership, but it makes any kind of stability in my view difficult when you don't own your home and have (or would like to eventually have) a family.
I don't have kids yet but wouldn't want them to have to move at a landlord's whim and not be able to decorate for them etc.
erm, because I'll be able to buy a house more cheaply...
with no job - higher interest rate - fewer lenders will to lend - etc etc
As I said before a slow down would be better.
Scum :mad:
I agree - it was the rules that were stupid - plus he also did it to benifit his family as they lived rent free.
Assuming you don't lose your job in the recessions which generally accompany a crash...
with no job - higher interest rate - fewer lenders will to lend - etc etc
As I said before a slow down would be better.
Tbh my job's pretty secure, I work for the government in a area where they are finding it hard to recruit. A big crash would serve me quite well.
But I accept your point that it wouldn't be good for all FTB.
We could see a pretty dramatic correction with no accompanying recession, though, with house prices just adjusting to more normal prices (i.e. historical average of price/average earnings multiple).
Yes it will. It'll mean that the first time buyers who currently can't afford to buy will be able to buy a house :clap:
And young families and first time buyers (with a little bit more cash than you ;) ) may end up homeless! :clap:
KennyVader
03-11-2006, 20:16
Tbh my job's pretty secure, I work for the government in a area where they are finding it hard to recruit. A big crash would serve me quite well.
If there were fewer jobs available in general, with private companies laying people off all over the place, these "hard to recruit for" government jobs might suddenly become a lot more in demand.
Never take anything for granted ...
If there were fewer jobs available in general, with private companies laying people off all over the place, these "hard to recruit for" government jobs might suddenly become a lot more in demand.
Never take anything for granted ...
I'm pretty sure that the Government will fill it's quota for those jobs and then stop recruiting. Those already in posts will be secure. Fortunately they don't look to replace you with anyone better (I know because I work for the Home Office)! It seems to take quite an effort to get sacked from a Government post.
Lagerlout
03-11-2006, 20:46
Usually when the housing market crashes, aren't interest rates up? In which case you may end up paying the same mortgage for a property of less perceived value?
KennyVader
03-11-2006, 21:03
Might be a silly question but won't it be great for first time buyers? Give them a chance to get on the market?
I don't know why people rant on about "giving first time buyers a chance". When I bought my flat seven years ago it was a huge struggle for me to get the cash together, and the first couple of years it continued to be hard as I had to go without niceties while the mortgage ate all my wages up. When my parents bought their first house 40 years ago it was a huge struggle for them too, they lived with my grandma for ages until they could afford their own place. First homes always have been a huge effort, and always will be. Seems to be the current fashion to just blame evil landlords and feel sorry for yourself rather than the old fashioned way of saving up for a few years, putting off the flash car, HDTV etc (or marrying a rich chick).
Besides if you have an area where lots of places are getting snapped up to be rented out, it just means the rents generally fall (in real terms anyway; i.e. the higher availability of rental places means that rents do not rise as much as they should). It all sorts itself out in the long run.
Drysolder
03-11-2006, 22:21
A mate of mine in Nottingham bought His Nans, his mum and dads and his wifes parents house all signed over to him after 3 years - with agreement theta they lived in them for maintenance only rents. Cost him about 70,000 for for 3 house worth over 23000 and that was 4 years ago - he then had the cheek to complain that he could not get a council house himself
And there was an article in today's Nottingham Evening Post about how people aren't buying new build flats in the City Centre anymore...
http://www.thisisnottingham.co.uk/displayNode.jsp?nodeId=133942&command=displayContent&sourceNode=201398&home=yes&more_nodeId1=133951&contentPK=15842679
I don't know why people rant on about "giving first time buyers a chance". When I bought my flat seven years ago it was a huge struggle for me to get the cash together, and the first couple of years it continued to be hard as I had to go without niceties while the mortgage ate all my wages up.
It has always been a struggle and it always will. What you need to look at is the comparison between your wages and the value of the property.
A one bedroom flat around my way could go for around £120,000. That's almost 6 x the national average wage. Back in 1999, I'm sure it would not have been anywhere near as high.
daveb_dvd
03-11-2006, 23:34
It has always been a struggle and it always will. What you need to look at is the comparison between your wages and the value of the property.
A one bedroom flat around my way could go for around £120,000. That's almost 6 x the national average wage. Back in 1999, I'm sure it would not have been anywhere near as high.
For comparison purposes, you could try the Would You Be Priced Out? calculator. (http://www.pricedout.org.uk/Resources/TheWouldYouBePricedOutCalculator/tabid/101/Default.aspx)
It's not 100% accurate due to regional variations, but shouldn't be a million miles away for most examples.
For comparison purposes, you could try the Would You Be Priced Out? calculator. (http://www.pricedout.org.uk/Resources/TheWouldYouBePricedOutCalculator/tabid/101/Default.aspx)
It's not 100% accurate due to regional variations, but shouldn't be a million miles away for most examples.
Cheers, spent ages looking for something like that!
Apparently in 1999, the average house cost 3.5 x the average wage and that had risen to 5.94 in 2004! :eek:
Usually when the housing market crashes, aren't interest rates up? In which case you may end up paying the same mortgage for a property of less perceived value? Not sure if usually is the right word, not aware of any such crashes occuring in low interest rate environments, but you're right.
Some here seem to think waiting and buying a flat subsequently marked down to 150k but ending up paying 7-8% over the term is a better deal than buying a 200k flat and paying 5ish %. If you cannot afford the theoretical flat at present price + rates, you'll not afford it much easier if the price drops 30% but the borrowing costs rise 50%
Anyone that is saying that a housing crash is, in any way, shape, or form, an event that should be cheered on and hastened has probably never read anything remotely related to finance and economic theory. The housing market and the economy are well-interlinked to say the least. In order to displace the housing market, a similar displacement in overall economic conditions would occur as well. As house prices crash, financial difficulties set in for some, interest rates steepen, credit gets tightened (leading to more financial difficulties), costs of doing business go up while at the same time consumer spending plummets, which leads to reductions in workforce to underpin the company's bottom line, leading to further financial difficulties and so on. Eventually the government steps in and lowers interest rates to kickstart the economy and lighten the load, and things head back the other way. :oh-hum:
Cirrus888
04-11-2006, 11:28
Whether you like it or not a correction will happen but when that will be is anyones' guess.
At the end of the day you have to look at your own postition on wheher you can afford to buy and never overstretch your budget incase a correction occurs when your not prepared.
If a correction does occur all you have to do is hang on to your property as sooner or later it will rise and exceed the value you bought it for (may take 5 years or it may be 10+).
If you simply can't afford a place just hang on to your money as you will be able to buy something sonner or later, in the meantime buy some stocks as leaving it in a bank is the same as giving your money away.
Matt.Wild
04-11-2006, 11:43
Yes it will. It'll mean that the first time buyers who currently can't afford to buy will be able to buy a house :clap:
People with this thought process really annoy me. Why do you have more right to buy a house than anyone else? Why does anyone deserve to lose their home because of a crash? I've just selling a house in Wales for £75k and the cheapest equivelant place down here in or around Taunton is about £130-140k.
Do I want a crash so I can buy a house down here? NO! I'm gonna have to save and work at it until I can buy a house down here. And when I do/can, it'll will be all the more satisfying because my hard work will have got the house, not someone relying solely on the multiples a lender will give them.
You don't have the right to own a house, you should work to own that right. I am. Its just a statement of modern society wanting everything NOW NOW NOW :oh-hum:
home_bas
04-11-2006, 11:58
I think there are 2 brackets of FTBers out there at the moment to be fair though:
- Those who presume they have a right to a house (we live in a society where possessions are now expected)
- Those who are trying really hard but are stumped by the relative pricing compared to years ago. As another poster said, the salary-to-price ratio is approaching 6x when it was 3.5x.
I'm in the second bracket but am realistic about it - a crash helps no-one except the Uber Rich, and I have to accept that it's just hard luck.
As much as property has become more expensive, other luxuries we enjoy are far cheaper these days. 32" LCD TVs for £350, DVD players for £20, high-specification cars...
It's all swings and roundabouts, and will be interesting to see what happens to the market in the coming years. The only thing I can see affecting prices in the future is economic collapse (not good), or the decline in birth rates meaning more people are dying and leaving homes, increasing suppply (assuming they are not let out).
cmgarrod
04-11-2006, 12:25
I've just heard today that my Landlord might be selling all of his rental properties as he feels the market has now peaked. He is a 'serial' landlord and has over 30 properties :( And he's always told us that he is in it for the long term!
home_bas
04-11-2006, 12:37
Every place I looked at recently bar 1 has been a landlord selling up.
If the return from cash/ISAs etc is close enough to rental returns/equity rise it's more economical to sell up in many cases.
KennyVader
04-11-2006, 12:46
I've just heard today that my Landlord might be selling all of his rental properties as he feels the market has now peaked. He is a 'serial' landlord and has over 30 properties :( And he's always told us that he is in it for the long term!
Well he's going to get one hell of a tax bill if he starts selling them, even if they are held in a company. Hope he's factored that in to his plans - would have thought of all people a "serial landlord" would be better off just stopping buying more for a while and ride it out, or maybe sell one in order to offset any losses the others are making.
I find it a very sad reflection on modern society that some people find such glee in the prospect of a housing crash. Sad really.
Hamburger3
04-11-2006, 13:04
What else can they hope for when the requirement salary is now x6 when it was 3.5 ?
The government is doing **** all about it.
How can anyone save up when the prices are going up every year. Its impossible for many people to do that.
People want stability in their lives and you dont get that renting now do you. I get ****** of with the "I have a house so **** you Brigade" on here.
DeadKenny
04-11-2006, 13:49
Remember though that in the last "crash" the prices fell so much because of the chancellor of the exchequer raising interest rates massively to counter runaway inflation.
Since then the government has handed over the reins to the Bank of England and there's less likelihood of them hiking up interest rates in the same way. Also inflation is still fairly low and under control.
All I can see happening is what's happened a lot over the years and that's the occasional slowing and then increase of house prices. That people aren't getting big enough pay rises to get onto the ladder just means the bottom end of the market will be starved of first time buyers, but instead will be replaced by buy-to-let buyers.
What I think will happen is the social divide we already have in this country will get wider.
If there is a crash there's a high risk of damage to the economy due to the amount people are over stretching themselves.
cjanderson
04-11-2006, 14:22
we can all wait for our folks to die and then can afford a place with their equity :)
as thats how its going to go, money being passed down the generations again.
andybhoy
04-11-2006, 14:44
we can all wait for our folks to die and then can afford a place with their equity :)
as thats how its going to go, money being passed down the generations again.
I hear 100 year mortgages are popular in Japan. I would imagine we'll go that way.
For most people in the UK, until recently, passing money through the generations has never been possible.
If I want the mortgage I want I'll pay it off at 65!
KennyVader
04-11-2006, 14:50
What else can they hope for when the requirement salary is now x6 when it was 3.5 ?
The government is doing **** all about it.
What should they do?
They can't just pay for everyone's house.
Ban people from owning second homes and then just watch that money run away to be invested in other countries/continents? That does not help the UK much.
Stop some companies like banks paying as much as they do, and then watch those companies uplift all their talented UK staff to other more accomodating countries, losing London's status as the financial capital of Europe and one of the three most important financial cities in the world?
It's a difficult one, but I'm not sure what the government could do about it that doesn't involve wrecking the country even more than many would say it already is.
I'm not sure what to think. As it is, it's extremely unlikely I will be able to buy a house within my lifetime, and I'm sure as hell not inheriting anything, and that prospect irks me more than a little. A crash within the next few months or so would actually do me, personally, a lot of good.
Personally, I think the government should legislate to heavily tax income from buy-to-let or second property or at least do something to alter the status quo. If there weren't the financial incentives to own second property, many wouldn't. But then I am a socialist *******.
I also think that the current market is unsustainable and believe that people barely living within their means isn't good for the economy either, although whether that means a price crash or not in another question entirely.
Perhaps it's also worth mentioning that some people believe that property prices will remain stable and inflation will catch up over time, ending the bubble as the economy catches up. Is there any negative side-effects of this happening (well.. aside from negative equity over time)?
Cheers, spent ages looking for something like that!
Apparently in 1999, the average house cost 3.5 x the average wage and that had risen to 5.94 in 2004! :eek:
3.5 x average salary in 1999?? Not where I lived it didn't, not even the cheapest houses cost anything less than 5xaverage salary.
KennyVader
04-11-2006, 15:46
Personally, I think the government should legislate to heavily tax income from buy-to-let or second property or at least do something to alter the status quo. If there weren't the financial incentives to own second property, many wouldn't. But then I am a socialist *******.
Wouldn't stop the professionals or even semi-professionals at all though - they'd just hold all their properties inside a limited company, which has a cost of £15 filing fee and perhaps a few hours' accountant time each year, so running costs of say £250 a year max. For the "little people" who have not run a small ltd company before, you will either get the more switched on estate agents and property developers offering hand-holding services in company formation for their clients, or some sort of property ownership umbrella company services appearing like there are already for IT and Building/Engineering contractors who would rather bung a few hundred quid to someone to run their company for them. Anyway, start taxing second home ownership and I can guarantee it'll just disappear overnight as people work around it. Try changing property ownership tax law for companies and you'll simply drive a lot of the holding companies offshore, which is definitely bad for the UK economy.
AndyWilson
04-11-2006, 16:08
It's more like 10x average salary in this part of the country. Most jobs are unskilled and low paid and house prices are at a typical South East level.
I earn what most people would consider a high salary yet I couldn't dream of moving back to the village where I grew up, especially as a few years ago they demolished all of the council housing where I used to live.
My friend was telling me that in Germany it is very difficult to evict tenants... if we had similar rules than maybe landlords wouldnt be so keen to let them out and get tenants to pay for their mortgages.
This is a topic that is very close to my heart having been priced out for years thus far. Right now I am renting and have no problem doing so. What annoys me is that anyone you talk to who are fortunate to own their own home take glee in looking down their noses at you because you are 'just renting'. Property ownership is some kind of snobby clique.
The problem these days is that everyone is keeping up with the Jones' so are MEWing (mortgage equity withdrawl) or borrowing to buy the latest and greatest cars, plasmas, designer clothes, hence high house prices facilitating this. Today's consumerism really infuriates me as people think that you can only judge their success as a function of the things they own.
Lots of people can't even afford luxuries and even have to borrow money just to pay for the essentials. How can council tax, energy prices and basic living costs increase much higher than wage inflation and these people not suffer?
I find people these days are full of greed and just want want want. Whatever happened to saving until you could afford something? People are more self centered these days and only intestested in themselves. I can't wait until everyone stops talking about property!
In my opinion this country is heading nowhere but straight towards recession with the numbers of bankruptices and IVAs going up exponentially and credit lending still increasing.
The treasury are printing money faster than ever before (M4 approx. 14% increase YTD) to keep the economy afloat, and yet inflation is apparently only 2.4%. Today's fiat currency is not linked to any supplied of precious metals or assets so it can increase at whatever rate the treasury wants. Maybe we need the re-introduction of a gold standard to prevent excessive input of money into the economy.
The socialist Labour govenment has been creating public sector jobs hands over fist to skew the employment figures.
How can you look at all of these facts and think that property will still increase, or the growth of the economy is sustainable?
Capitalist economies need a boom and bust cycle to constantly refresh the economy. By delaying the bust by pumping the economy with devalued sterling Gordon Brown is simply allowing the bubble to inflate further which will result in a bigger bust and longer downturn.
If I want the mortgage I want I'll pay it off at 65!
well then the question is; do you want the mortgage you want?
Also, about 10 years ago anyone with a job could afford a decent 3 bedroom semi-detached house. These days you have to be a banker with 5 figure bonus to be able to afford those types of houses.
These days you see relatively unskilled workers living in nice areas in 3 bedroom semis due to fortunate timing, whereas these days professional workers such as doctors, solicitors etc. cannot afford anything remotely decent. The people that bought years ago are also now buying up BTL and 2nd home properties, further distancing the rung from many FTBs.
Where is the reward for doing well academically and being employed in a professional job? To me it seems a lot of people in this country are fortunate to be paper rich due to their timing, our obsession over owning property and speculative investors. When will the situation correct itself?
I blame everything on Gordon Brown for the pensions crisis forcing everyone to look for better investments to fund their retirement.
we can all wait for our folks to die and then can afford a place with their equity :)
as thats how its going to go, money being passed down the generations again.
You are forgetting that most estates are now valued over the IHT threshold, goodbye 40%.
cjanderson
04-11-2006, 18:08
You are forgetting that most estates are now valued over the IHT threshold, goodbye 40%.
goodbye 40% of the excess over 300k. I'll cope ;)
There's no simple answer to the whole situation, that's a given, but one thing I think which is relatively ignored in these arguments is that things are markedly different in the financial world nowadays compared to the 70s/80s in one major aspect. Note the overall financial markets reaction to 11Sep or to Katrina or 7/7, there were 'ripples in the pond' but markets stabilised quite quickly and within a short period were back as they were really.
All of the major currencies of the world ($ £ € ¥) have independent committees unbeholden to the current govt and unswayed by politics or election concerns in charge of the local interest rates and money supply controls. I don't believe anyone would try to argue Alan Greenspan was a puppet of any of the US presidents/legislatures during his extended term heading up the Fed, and the MPC now has been/is similar, as are the heads of the new unified Euro. No longer will governments "be able" to ratchet rates up and down as they so please in such a drastic fashion, and "appeasement" rate hikes to artificially effect price stagnation/decrease just won't happen.
They will raise interest rates again this week but the housing market will be this much of a concern of theirs (finger/thumb close together) and the increasing "home equity spending" and debt loads will be this much of a concern (arms wide apart).
We have been homeowners for about four yrs now, but we rented for the first thirteen years of our marriage and never once felt we had a right to own a house or feel we had any right to live in a given neighbourhood / area as some do.
If a couple only makes £30k a year but homes in your chosen spot cost £250k or £300k, then consider looking/buying somewhere you can afford.
We were lucky to get to live in Fulham when we first moved over in 96/97 since Barclays gave me a subsidised flat for awhile at first while we settled in. We then little by little moved further and further out of central London as we rented/moved around. When we finally decided 'sod this, rather eat pot noodle every night and never go out than continue to pay someone else rent' and started house hunting, it became painfully obvious we could not afford to buy anything anywhere around we had rented previously, so looked around until we found something in our price range in a neighbourhood which looked okay, had decent transport, etc etc. Ended up buying in Zone 3, but we're on a nice street, schools nearby seem good and local amenities are quite good as well.
Some friends of ours did own houses back when we first got married, but we always considered them either more fortunate than us, or they were just simply financially better off than us, so we didn't feel any desire for them to get shafted and stuffed with negative equity just so we could join them on the property ladder. :shrug:
edited to clarify 30k remark to have meant a couple
It's a pretty morbid idea that you want to cash in when your parents die.
As others have mentioned, it is those that go out and splash the cash that struggle to get on to the property ladder. Where as those who budget and save are the ones who are able to buy and are able to withstand rate increases.
KennyVader
04-11-2006, 18:22
The treasury are printing money faster than ever before (M4 approx. 14% increase YTD) to keep the economy afloat, and yet inflation is apparently only 2.4%. Today's fiat currency is not linked to any supplied of precious metals or assets so it can increase at whatever rate the treasury wants. Maybe we need the re-introduction of a gold standard to prevent excessive input of money into the economy.
...
By delaying the bust by pumping the economy with devalued sterling Gordon Brown is simply allowing the bubble to inflate further which will result in a bigger bust and longer downturn.
I'm no economist and I'm sure it shows. But "printing money faster than ever before" implies increasing the amount in circulation. I thought you could not make extra money like that, I thought the amount in circulation had to be kept constant, so to print new notes they had to collect in the same amount of old notes and burn them?
If you print more notes than are taken out of use then that has to make the pound worth less compared to other country currencies ... is this the devaluing you mention? Then how come the pound buys 1.9 USD today but only bought 1.4 USD five years ago?
cjanderson
04-11-2006, 18:23
It's a pretty morbid idea that you want to cash in when your parents die.
As others have mentioned, it is those that go out and splash the cash that struggle to get on to the property ladder. Where as those who budget and save are the ones who are able to buy and are able to withstand rate increases.
well i'll be (hopefully 70) when they pop off. hardly PAR-TAY central
But from watching location location or relocation shows, the reason they can afford 1 properties is usually partyly as they have had (in their 30s) a large inheritance which enabled them to buty a 4 bed place rather than the small 1 bed flat, in a less than desirable area that the rest of us can afford.
I'm no economist and I'm sure it shows. But "printing money faster than ever before" implies increasing the amount in circulation. I thought you could not make extra money like that, I thought the amount in circulation had to be kept constant, so to print new notes they had to collect in the same amount of old notes and burn them?
If you print more notes than are taken out of use then that has to make the pound worth less compared to other country currencies ... is this the devaluing you mention? Then how come the pound buys 1.9 USD today but only bought 1.4 USD five years ago? The amount of 'cash in circulation' of a given currency does impact the market value in relation to the basket of other currencies around the world, but only when (as the USA did post 11Sep and less so for Katrina) massive injections are done in short periods is it really a destabilising or causative factor when exchange rates adjust. Interest rates and such are more determining factors.
So having rented to the age of 70, would there be any need to go and buy your own property only to die a decade later and once again let your beneficiaries shell out more IHT?
Rip Curl
04-11-2006, 19:18
How can you look at all of these facts and think that property will still increase, or the growth of the economy is sustainable?
Capitalist economies need a boom and bust cycle to constantly refresh the economy. By delaying the bust by pumping the economy with devalued sterling Gordon Brown is simply allowing the bubble to inflate further which will result in a bigger bust and longer downturn.
That is the way I see Great Britain going. Although the pound is not currently devalued.
I can't believe this is sustainable, there will be a 'bust' (I reckon two years into the next goverment)
I don't know why people rant on about "giving first time buyers a chance". When I bought my flat seven years ago it was a huge struggle for me to get the cash together, and the first couple of years it continued to be hard as I had to go without niceties while the mortgage ate all my wages up. When my parents bought their first house 40 years ago it was a huge struggle for them too, they lived with my grandma for ages until they could afford their own place. First homes always have been a huge effort, and always will be. Seems to be the current fashion to just blame evil landlords and feel sorry for yourself rather than the old fashioned way of saving up for a few years, putting off the flash car, HDTV etc (or marrying a rich chick).Is that the sound of violins I hear?
Nice story and I don't doubt that they and you all struggled but you can bet your ass that those houses didn't cost seven times the average wage.
If you only make £30k a year
You make it sound like £30k is a below average wage! :) I suppose in relation to house prices it is, I mean after all it is only 6.66x (is that number coincidence?) less than the average house price. £60k seems more appropriate at 3.33x.
So why are wages so low compared to the cost of living these days? I'm sure if this were the case in the 70's or 80's we would have riots and demonstrations, but I see nothing of the sort happening as people are so wrapped up in the value of their houses.
Well done Gordon Brown and Labour for pulling the wool over the country's eyes.
I really do despair, how many people out there truly understand what is happening apart from what the headline is in The Sun (or equally good newspaper...)?
home_bas
04-11-2006, 22:10
The rich are getting richer - apparently city bonuses will make over a thousand more millionaires this year. Whilst the rest of us proles in the Square Mile who do the donkey work get sqaut.
This is just taking the finance industry into account, I'm sure it's the same in almost all industries.
I think there need to be curbs on boardroom pay and bonuses, it just seems plain wrong that a few people at the top are creaming it in but there's no room for pay rises for the rest of us.
well then the question is; do you want the mortgage you want?
:suspect:
Yes, but I'm getting the woman out to work as soon as the kids are at school so I can reduce that.
The rich are getting richer - apparently city bonuses will make over a thousand more millionaires this year. Whilst the rest of us proles in the Square Mile who do the donkey work get sqaut.
This is just taking the finance industry into account, I'm sure it's the same in almost all industries.
I think there need to be curbs on boardroom pay and bonuses, it just seems plain wrong that a few people at the top are creaming it in but there's no room for pay rises for the rest of us.
ALL ANIMALS ARE EQUAL, BUT SOME ANIMALS ARE MORE EQUAL THAN OTHERS.
fuzzb3k - had meant 30k combined on a couple, now edited to clarify :thumbs:
As we all know, there are places in this country where a 3 bed house is £70k, and there are places where a 3 bed house is £350k ... one well within reach of the theoretical couple, but one only a pipe dream.
People with this thought process really annoy me. Why do you have more right to buy a house than anyone else? Why does anyone deserve to lose their home because of a crash? I've just selling a house in Wales for £75k and the cheapest equivelant place down here in or around Taunton is about £130-140k.
Do I want a crash so I can buy a house down here? NO! I'm gonna have to save and work at it until I can buy a house down here. And when I do/can, it'll will be all the more satisfying because my hard work will have got the house, not someone relying solely on the multiples a lender will give them.
You don't have the right to own a house, you should work to own that right. I am. Its just a statement of modern society wanting everything NOW NOW NOW :oh-hum:I've worked just as hard as anyone else but chose not to buy a house when I was 21 because I didn't want or need it. It's not my fault that the price of houses has gone whoosh like a compared to wage rises which have gone huh. And FYI I haven't wasted my money either, I've kept up a weekly standing order saving the money that would've been spent on a mortgage rather than ******* it up the way. In real terms I believe that my savings (i.e. actual money) is worth more than the inflated equivalent that it would've been had I bought a house so am loathe to spend it now on a house that is worth less than the true value of the money.
Thats the reasoning behind my thought process so if you want to be annoyed then it's your choice.
I find it a very sad reflection on modern society that some people find such glee in the prospect of a housing crash. Sad really.It's not glee. It's relief.
Having read this (http://news.bbc.co.uk/1/hi/business/5297672.stm) and then this (http://news.bbc.co.uk/1/hi/business/6101154.stm)
"Bank of England data earlier this week showed that mortgage approvals - an indicator of future demand - have risen to their highest level since February 2004.
I don't see how we should be worried about a meltdown?
Having read this (http://news.bbc.co.uk/1/hi/business/5297672.stm) and then this (http://news.bbc.co.uk/1/hi/business/6101154.stm)
"Bank of England data earlier this week showed that mortgage approvals - an indicator of future demand - have risen to their highest level since February 2004.
I don't see how we should be worried about a meltdown?
That is the problem. So long as people only read spin without looking into the facts behind the spin, then no one is the wiser. A lot of the articles on the BBC are biased, along with newspapers such as the Daily Express which seems to have a 'By the time you've finished reading this your house will have gone up by £50' headline every other day (interspersed with Princess Diana conspiracy stories).
scoooooot1
05-11-2006, 02:07
I've worked just as hard as anyone else but chose not to buy a house when I was 21 because I didn't want or need it. It's not my fault that the price of houses has gone whoosh like a compared to wage rises which have gone huh.
but your lack of judgment in deciding not to buy is your fault and you should reflect on that rather than sitting there night after night praying for the market to crash...
Cirrus888
05-11-2006, 04:30
There will always be two parties in this, those without a house and those with a house. Pointless debating to one another as one will never agree with the other.
I don't have a house by the way so I'm waiting for a correction.
Matt.Wild
05-11-2006, 07:19
but your lack of judgment in deciding not to buy is your fault and you should reflect on that rather than sitting there night after night praying for the market to crash...
Exactly. I've owned houses since I was about 20 and made sure i'm in the market. Because YOU haven't made a move and sorted yourself makes YOU very selfish that other people lose their houses so YOU can have one.
What makes YOU so special tha YOU should own one above anyone else? :nono:
richard67
05-11-2006, 07:58
What shocks me more than anything is the betrayal of the current government who have stood back, nay, positively encouraged, this situation because it makes them look good. Look how the economy is 'growing' with all this money sloshing about - money borrowed not earned, or acquired by the electorate selling their own homes to themselves at ludicrously inflated prices (MEWing) so they can spend the 'profit'. When this economic pack of cards collapses there will be carnage and untold human misery FOR YEARS. The huge apartment blocks I see going up in Cardiff Bay (while existing ones are 30% empty) will be good for jumping off and that's about it. There are the lucky ones (I consider myself lucky because I have the good fortune to be 47 years old and to have made purchases in saner times), but so many people will find themselves saddled with monstrous debts, facing rising bills and prices, in a shrinking job market, with virtually no hope of a comfortable retirement. Once upon a time you'd have needed a lifetime of chronic gambling or boozing to get yourself into a situation like this - now it's enough to be under 40 and an ordinary voter. Just because the population is happily streaming out of Argos and filling the boots of their cars with crap paid for with money which doesn't exist doesn't mean we have a healthy economy. Cheers, Gordon. You've done the vast majority of working people proud.
Captain Chunk
05-11-2006, 08:12
When people at the bottom of the housing market cant afford the houses at the bottom of the market then eventually something has to give.A lot of first time buyers are being lent deposits from parents who are releasing equity or having to borrow 4x wage morgages.
Madness
With more & more banks offering higher & higher multiples, and with interest still at historically low rates (not lowest, but not much higher), people can still be lent enough to get a place (due to the multiples) & can still afford to make the repayments (due to the interest not being that high),
I am looking at borrowing 4.5 times salary, and this will be about 60% of take home pay - affordable
Not only are they doing higher multiples but also longer terms; a friend of mine has recently taken out a 30 year mortgage
andybhoy
05-11-2006, 10:23
60% takehome pay?
That may be affordable right now, but if the rates were to go up even a couple of percent, you'd be hard pushed to keep up, when you have all your bills to pay too - unless you're earning a massive wage.
I'm buying a place, and my mortgage payments are roughly 40% to 45% of my take home pay ( a little over 4x my gross pay). That's as much as I'm willing to go, as I'd like to be able to live after I've paid my mortgage each month. Obviously, I don't earn a massive wage. If I did, I'd have more wiggle room. I've left enough that if rates doubled, I'd survive. If they trebled, I'd need a second job and/or a lodger.
Nebiroth
05-11-2006, 10:28
goodbye 40% of the excess over 300k. I'll cope ;)
I'm sure you'll enjoy the fact that if IHT thresholds aren't adjusted, pretty soon ANY home will be over it. Unless you're also left a lot of cash, this means to pay the tax, you'll have to sell your home, and the money you're left with won't be enough to buy another one!
cjanderson
05-11-2006, 10:57
I'm sure you'll enjoy the fact that if IHT thresholds aren't adjusted, pretty soon ANY home will be over it. Unless you're also left a lot of cash, this means to pay the tax, you'll have to sell your home, and the money you're left with won't be enough to buy another one!
well again, iHT is paid after you are dead. so you as recipient would still get 300k in cash before the tax kicked in. More than enough to buy any new place when combined with your income.
My parents says about when they bought a house and it was a struggle. its a struggle for anyone to buy a place. i'd like to afford a place in central wimbledon but i can't even on a decent salary. So i have to live in a much less nice area. such is life.
DeadKenny
05-11-2006, 10:59
So why are wages so low compared to the cost of living these days? I'm sure if this were the case in the 70's or 80's we would have riots and demonstrations, but I see nothing of the sort happening as people are so wrapped up in the value of their houses.
It makes you wonder how inflation can be so low with house prices running away.
Well of course house prices aren't considered in the inflation figures ;). If they were the BoE would be more concerned and raise interest rates to put the breaks on inflation and house prices...
... which is what happened in the last housing crash and recession.
Mr. Brown
05-11-2006, 11:02
Perhaps a little OT but I feel quite strongly about the current state of the economy and would ike to share a little of my history...We'd been on the housing market since the early 90's when the preceeding crash had forced a large amount of re-possessed property on to the market. Although we managed to make our first house a 3-bed semi with garage on a village estate at just over £34k we still ended up having to sell it and declare ourselves homeless as the interest rates were so high and the job market was not moving on which meant continually low wages. So it wasn't quite as rosey then as FTB's these days may assume.
Having been lucky enough to buy our council house at discounted rates some years later, and with a much better salary to fall back on we were able to eventually purchase a 4-bed victorian townhouse using our equity as a deposit. The trouble was we were paying around £900 a month for the mortgage and insurances, which was fine until I realised how much I hated my job and decided I had to leave it for something a little less soul-destroying.
A £7k drop in my annual income meant my wife having to work part-time in order to keep up the mortgage payments, which left us working opposite shifts and the kids somewhere in the middle. I realised at this point that everything we had achieved financially over the past 15 years had been working towards owning a nice property and here we were living in it as almost strangers. That was enough for us and we sold up. The equity was reasonable but some had to be used to pay off debt that had accumulated due to us continuing to try and live a certain lifestyle that we had come to expect (hoiday once a year, eating-out at weekends etc.). We were living a false economy because all we could see was the nice house we owned, although clearly it was the bank who pretty much owned it... not us.
Anyway, we're renting now and have no desire whatsoever to purchase a property again. I earn half of what I did when we bought our last house but I love my job, my wife doesn't have to work and we are financially better off. When we shuffle off there will be nothing left for our kids to inherit, and neither of us plan on inheriting anything from our parents either.
I firmly believe that the 'must own' culture has created this huge pressure to become a FTB in a time when house prices are (as pointed out by many previous posters) so out of kilter with the national wage average. To compare the situation with previous decades though is not productive as the only people who could really benefit from past market crashes were the mega-rich who were able to buy up streets/estates/apartment blocks and then let them or sell them on a year later. This is still the case now and those FTB's that are waiting for a crash in the hope of a cheap property will only find themselves knee-deep in interest rate increases, with an unstable economy and low job security.
cjanderson
05-11-2006, 11:07
did masses of people buy places on their own in the past? thats whats fueling it partly, sheer demand, we all want to buy a place on our own so double the amount of property is needed than what was available in the past.
so we want something on our own so double the number of people looking but on only one salary rather than 2. hence a lot harder
Mr. Brown
05-11-2006, 11:12
That could well be a big part of it cj? I would think that people settled down as a couple at a younger age 15-20 years ago than they do now but I couldn't back this up with evidence.
Although apprently the average age that people move out of their parents homes now is 27 so that's going to have an effect in the opposite direction.
cjanderson
05-11-2006, 11:16
there is of course the high rates of divorce as well so people going from 1 house to 2 smaller places post divorce.
DeadKenny
05-11-2006, 11:21
Thing about this "ah well, no one in Europe buys, they all rent" argument is many European countries have better pensions than us these days.
For most people today, pension prosepects are worse than hopeless (by most I mean modern pensions that aren't final salary, and ignoring public sector pensions).
Even personal pensions these days are pretty crap (I was shocked when I saw what the predicted income would be on mine despite actually chucking in a lot of money, and more shocked when I found out that removing my contributions and sticking with just the company's, made little difference! :eek: ).
I questioned my pension adviser about it and he said the best thing to do is get some other investments, in particular a house if you haven't got one already but more importantly pay the mortgage off quickly. i.e. if you have a house, chuck as much as you can at the mortgage to pay it off early and thus end up with a house, equity, and nothing to pay on it. You can't do that with rent. A house is the biggest kind of investment you can make.
With the current pension situation, if you are renting for the rest of your life, you're screwed when you retire. Even if you have a house and pay it off over the 25 years, when you retire you have no more payments on the house. Renting you're still paying a fortune each month out of a pension that pays peanuts.
The only other solution really is to get a public sector job as they at least get better pensions.
KennyVader
05-11-2006, 11:28
did masses of people buy places on their own in the past? thats whats fueling it partly, sheer demand, we all want to buy a place on our own so double the amount of property is needed than what was available in the past.
Well as far as I can make out lots of couples would have lived with one of their parents for quite a few years. And when they did move out, a lot of them would be to subsidised housing through their local council - however both conservative and labour governments have allowed the selloff of council properties at stupidly low prices (it was not until 2005 that labour changed the rules slightly to try to curtail the profiteering going on here) so there are less of them available now. Plus of course old folks are living longer these days so many properties are not coming back on to the market for longer.
Mr. Brown
05-11-2006, 14:09
With the current pension situation, if you are renting for the rest of your life, you're screwed when you retire. Even if you have a house and pay it off over the 25 years, when you retire you have no more payments on the house. Renting you're still paying a fortune each month out of a pension that pays peanuts.
But then if you require care in your old age you will have to sell your house anyway to pay for it whereas if you don't own a house or have substantial savings the care will be free. It's a double-edged sword for sure.
Much better to have stable affordable housing
Except the houses aren't currently affordable... :shrug:
Who says - the majority of people seem to manage it is all about life style choice - A lot of people moan about paying rent of 600 pounds per month when a mortage would not be much more - and still rumn flash cars have holidyas nights out etc
It is about choice even in the south east housing is available at affordable prices a 2 bed flat £500 PCM to rent and £110,000 to buy so a mortage of £650 not a lot more than renting.
Who says - the majority of people seem to manage it is all about life style choice - A lot of people moan about paying rent of 600 pounds per month when a mortage would not be much more - and still rumn flash cars have holidyas nights out etc
It is about choice even in the south east housing is available at affordable prices a 2 bed flat £500 PCM to rent and £110,000 to buy so a mortage of £650 not a lot more than renting.
You're assuming that those people paying £5-600 per month rent are able to get a mortgage for £110,000 and have enough cash for the deposit, solicitor's fees, moving fees, stamp duty, etc.
Unclegrump
05-11-2006, 14:31
Maybe I am getting mixed up with the average income - average house price comparisons with actual property value increase, but hasn't it always been this way???
My parents bought their first house for around £5,000. Ten years later they sold it for £30,000 - a six fold increase. They then bought another house for £25,000 and sold that one 15 years later for £125,000 - a five fold increase.
Surely house prices always rise, and rise quite substantially as well or am I completely missing the point here? I can understand that the price of housing can be an impediment to those trying to get on the ladder, but it was the same for me 10 years ago when I wanted to buy. I had to stay with my folks until my mid-late twenties in order to save enough money to buy somewhere not in the most pleasant area of Liverpool.
DeadKenny
05-11-2006, 14:33
But then if you require care in your old age you will have to sell your house anyway to pay for it whereas if you don't own a house or have substantial savings the care will be free. It's a double-edged sword for sure.
The care won't be free just because you don't own a house. Certainly not by the time I retire. Only savings, investments or selling equity will pay for it.
Though it doesn't help when there are certain companies around who convince some old people who don't really need a care home, to go into care accommodation by selling up their house and paying essentially for a short term rental in sheltered accommodation that has no equity value to even leave to their offspring. Often swayed by the modern facilities offered and supposed care provided. I've seen some of these places and they're tiny flats effectively and they've just sold their house worth a few hundred thousand to a retirement company for these tiny places :oh-hum:
3.5 x average salary in 1999?? Not where I lived it didn't, not even the cheapest houses cost anything less than 5xaverage salary.
Thats why it's taken as an average. It differs from area to area.
but your lack of judgment in deciding not to buy is your fault and you should reflect on that rather than sitting there night after night praying for the market to crash...The only mistake I feel that I've made is not realising that the housing market was some kind of game and not the constant that it should be.
How many other consumer markets have seen the price rise like houses have? FFS, you can now get a DVD player for less than a DVD itself!
Considering it's the most important thing that most people will ever buy there should be forces in place to ensure that it isn't the gamble that it had become.
Dave h-j
05-11-2006, 15:06
How many other consumer markets have seen the price rise like houses have? FFS, you can now get a DVD player for less than a DVD itself!
Maybe we should ask China to start mass producing houses and ship them over here in the tens of thousand :)
Exactly. I've owned houses since I was about 20 and made sure i'm in the market. Because YOU haven't made a move and sorted yourself makes YOU very selfish that other people lose their houses so YOU can have one.
What makes YOU so special tha YOU should own one above anyone else? :nono:Hang on chuckles, less of the CAPITALS :gag:
I don't want people to lose their houses, thats not why I'd welcome a crash. There needs to be a "crash" to bring prices back down to where they would've been had they not risen waaaaay ahead of the average wage.
OK, those that have bought in the interim will need to be compensated, maybe the Government can dip into their anti-racism campaigning funds and give to those that have missed out.
But those that are sitting on houses with hyper-inflated values well above the mortgage that they're playing will lose nothing except money that they thought they had and didn't deserve.
DeadKenny
05-11-2006, 15:19
How many other consumer markets have seen the price rise like houses have? FFS, you can now get a DVD player for less than a DVD itself!
Well there you've got a cheap influx of new players which makes the market for selling them second hand worthless. If new houses were sold so cheap you'd have a similar situation as there would be no incentive to buy a second hand house that was more expensive.
Supply and demand. DVD players, the supply outstrips the demand. Houses the demand outstrips supply.
Now you could look at it from the point of view of cars which depreciate in value, but yet new cars are more expensive. Problem is that the supply is plentiful. Again supply & demand. Cars have a lot of wear and tear also, so the market is fragmented into new cars where demand is high and old cars where supply is high but demand is lower.
However with really old cars that are in very good condition, supply is low and demand is high, so the price of such cars rises. Collectable items and antiques similarly see price rises beyond their retail value.
Houses are also more than a consumer item, they are an investment, and like any investment prices rise and fall, but the trend is to rise over a long period in a normal market economy. You could invest in stock, shares, etc and potentially see rises of this proportion over time, though they are typically not as high as a house because not all shares rise at the same rate and they are a higher risk.
... will lose nothing except money that they thought they had and didn't deserve.
Erm Squeaky ... you seem to be rabidly against profiting from real estate. Is that in general, or just until you're allowed to buy a house, at which point it would be okay if things doubled?
If the former, then why would you want to be a homeowner at all? :thinking: :?:
I don't think house are more expensive in real terms today - In 1961 my Dad bought a 2 bed house for 3,000 pounds he earnt about £600 per year
so house were 5 times an anual salary - today I earn (well get paid) over 35,000
and I can get a 2 bed house for well under 170,000 so where this affordability comes from is beyond me.
A 2 bed house around here is 120,000 so 24,000 per year would equate which is not a lot in the south east.
People want cars, holidays nights out and a house - that is the issue.
To rent a 2 bed house £550 to buy on a 100% mortage £650.
I know what I would do.
Supply and demand. DVD players, the supply outstrips the demand. Houses the demand outstrips supply.Well in this thread we've had both Nottingham and Cardiff mentioned as examples where it doesn't.
I don't think house are more expensive in real terms today
According to the website mentioned earlier:
In 1961 the average house cost 3.2 times the average salary.
During 2004 it hit 5.91 the highest ratio ever recorded.
Erm Squeaky ... you seem to be rabidly against profiting from real estate. Is that in general, or just until you're allowed to buy a house, at which point it would be okay if things doubled?
If the former, then why would you want to be a homeowner at all? :thinking: :?:It isn't rabid, I'm not frothing at the mouth you know! But you are right, people shouldn't be profiting from real estate (as you put it). I'm firmly of the opinion that a house is to nest, not invest.
DeadKenny
05-11-2006, 16:53
Well in this thread we've had both Nottingham and Cardiff mentioned as examples where it doesn't.
These are new build luxury apartments in city centres which are extremely expensive.
Yes in that respect, supply is greater than demand, but like cars it's a fragmented market.
Below the luxury market demand is still greater. For first time buyers demand is at it's highest.
These are new build luxury apartments in city centres which are extremely expensive.
Yes in that respect, supply is greater than demand, but like cars it's a fragmented market.
Below the luxury market demand is still greater. For first time buyers demand is at it's highest.Yeah fair enough I kind of knew that anyhow, it's just those in demand being picky I guess. So who are these luxury apartments aimed at if they're too expensive for FTB's and too pokey for STB's (if thats the right term!)
Dave h-j
05-11-2006, 17:04
Well in this thread we've had both Nottingham and Cardiff mentioned as examples where it doesn't.
The real trend in the last few years has been to build new 1/2 Bed lofts in City Centres. 20 storey tower block might fit a certain demographic, but probably isn't suitable for the elderly, people with kids, etc.
There certainly does seem to be over supply of these types of places - but the fact that so many are left empty would suggest that these aren't the places that people are after. The problem with houses is that they require a lot more land, so means expansion. Unfortunately, in city or central locations, the space just isn't available. Some brown field sites are being used, but again, these tend to be higher density flats. For larger houses/gardens/garages, etc then you need to look at outlying suburbs.
Who says - the majority of people seem to manage it is all about life style choice - A lot of people moan about paying rent of 600 pounds per month when a mortage would not be much more - and still rumn flash cars have holidyas nights out etc
It is about choice even in the south east housing is available at affordable prices a 2 bed flat £500 PCM to rent and £110,000 to buy so a mortage of £650 not a lot more than renting.
In london a 2 bed flat isnt £500 PCM to rent or even £110,000 to buy.Im right out in Zone 6 and another 5 mins west and I wouldnt even bee in London any longer but Studio's are £550,1 bed flat flats are £650 and 2 bed flats are 750/800.If you want an house then you are probaly looking at 800-850.
If you are looking to buy then Studio's are £105K upwards,1 bed Flats £140K and 2 bed and houses start around £160K so why you think housing is at the levels you stated in the south east is lost on me.What area have you seen prices like this.
Im currently purchasing a flat because the mortgage isnt working out much more than renting a place would and Im sick of moving around.
It isn't rabid, I'm not frothing at the mouth you know! But you are right, people shouldn't be profiting from real estate (as you put it). I'm firmly of the opinion that a house is to nest, not invest.
You ignore the basic premise of 'the housing market' though, what incentive is there to be a homeowner (and with it all the risks/burdens that entails) if one does not have capital appreciation?
One would be better off renting in perpetuity and use monies for other investments/pension/etc. Then you're not potentially at risk of say, the boiler failing and needing to come up with a sizeable chunk of cash quickly, or some other issue that a landlord would be obligated to sort at no financial cost to the letter.
Nebiroth
05-11-2006, 18:41
well again, iHT is paid after you are dead. so you as recipient would still get 300k in cash before the tax kicked in. More than enough to buy any new place when combined with your income.
Read my post again. If ALL properties are valued at more than the threshold, this means that you would
1) Have to sell the property inherited, in order to pay the tax, unless you were also left substantial sums of money as well
2) The money you had left over after this wouldn't be enough to buy a new property
This may sound silly, but it is certainly the way things are headed. Already in London, nearly *all* properties *everywhere* exceed the threshold. The South-East is following fast, and the whole country will be there in 10-15 years time.
Of course, it won't matter to people who own their own homes, they can just sell the property they inherit for a profit, but it will leave anyone who needs the family home to actually live in right up the creek.
The problem with IHT is that property had completely skewed it. Most estates leave one, high value asset that the owners cannot liquidate or give away whilst they are alive because they need to go on living in it. The family home.
But a rich person can give away their mansion and go and live comfortably in a luxury rented flat so avoid the tax.
Certainly, IHT was never, ever intended to affect people who live in a two-bedroom ex council house.
But Gordon Brown will quite contentedly let fiscal drag pull more and more money in from the tax, particularly because at the moment the most affected areas of the country aren't Labour strongholds.
home_bas
05-11-2006, 18:47
You ignore the basic premise of 'the housing market' though, what incentive is there to be a homeowner (and with it all the risks/burdens that entails) if one does not have capital appreciation?
I want a home not tgo make reams of cash out of it - I want stability, somewhere that I can make improvements to when I want, and a roof over my head for a (future) family that is in my own hands.
I can't get any of that from a landlord.
As I've stated earlier on this thread I've had to accept the situtation at the moment and deal with it rather than stamp my feet and moan, but just pointing out my reasons for ownership aren't primarily investment-oriented.
You ignore the basic premise of 'the housing market' though, what incentive is there to be a homeowner (and with it all the risks/burdens that entails) if one does not have capital appreciation?Erm, to own your own house!
Are you going to try and convince me that more than 50% of people buying houses today are doing it as a investment and not as somewhere to live?
cjanderson
05-11-2006, 19:40
Read my post again. If ALL properties are valued at more than the threshold, this means that you would
1) Have to sell the property inherited, in order to pay the tax, unless you were also left substantial sums of money as well
2) The money you had left over after this wouldn't be enough to buy a new property
i said inheritances help people get on the ladder (plus their own savings and salary), not pay for the whole lot. we have already said people can afford the mortgage payments based on their current rent paid but just not get lent that much, hence need a deposit of a sizeable chunk to get the mortgage.
Are you going to try and convince me that more than 50% of people buying houses today are doing it as a investment and not as somewhere to live? No but I bet much more than 50% enter into home ownership with full expectation/hope of making a good return upon their investment.
home_bas
05-11-2006, 20:02
To be fair I think anyone would hope to get some kind of return, but large returns across the board do no-one any good if it stretches the rungs further apart.
For example, I'll be stretching myself to get a one-bed place. If inflation continues as it is, I'll be in deep do-do if I have 2 kids, need a bigger place, and salaries carry on rising at a far lower rate than prices do.
For a start it'll be difficult to pass on such a place to a FTBer as they will be even more out of reach, and the next rung up will be even further away.
So let me get this straight, I might be wrong on the subject but in the recent past wasn't an endowment mortgage a popular way to pay?
Am I right in thinking that that way you'd pay off the interest and pay a seperate "insurance" that when it matured would pay off the cost of the mortgage. Now if I'm right we must have a good percentage of home owner who have policies that won't cover the cost of their houses.
To me that sounds like a alot of people who weren't looking to make a financial gain on the property that they were buying but were indeed but a house and paying for it what seemed like a sensible way.
Of course, I might be wrong!
joconnor
05-11-2006, 20:11
For years I was saying (hoping) that all things are pointing to an imminent price crash/decline.
I was a FTB at the time and was really hoping for the market to slow. It never did and still doesn't look like it will. I eventually bought a house, it cost 150k (the nextdoor had bought theirs 3 years previous for 100k) so I was worried I was buying a house at a hugely inflated cost.
A house across the street, identical to mine, sold last month (2 years after I bought mine) for 190k.
Houses around my area (east mids) generally last about a month on the market before the Sale Agreed signs go up.
I really cannot forsee any decline in prices in the near future. Which sucks because I was hoping to climb the ladder but an 'upgrade' would be just too expensive right now.
bridpopper
05-11-2006, 20:24
I love how home owners like to pontificate on people wanting to be able to own a home with lectures about them being able to afford ipods, cheap lcd tvs and other 'fluff' as their reasons for not being able to own a home.
My parents and me and my brother grew up in a home where my dad earned the average salary but could afford a 3 bedroom semi and my mum worked part time - on the typical 3x salary etc.
Now my dad says its unrealistic of my generation (im 27) to expect what he expected. Its laughable really since his generation grew up with free education but then when his generation got in power, they took it away and made us pay for it (well not me, but everyone a year younger ...).
Its really easy to lecture others about what they should or shouldnt have or do, when you have it, and they dont. The sad truth in my mind is that deregulated banking, artificially low interest rates, a money supply happy bank of england (the MPC are appointed by gordon brown btw - very 'independant') and a bunch of lies telling us inflation is lower than it really is ..... have created a housing bubble that conveniently got us out of a post 9/11 depression that we never got (we should have).
Yeah - we live in a shallow society these days. But i never thought that wanting to be able to live in a crummy one bedroom box flat was the height of 'greed' when our parents generation demanded a semi, a garage, a greenhouse and some net curtains to peer behind from as their 'minimum standard'.
I blame a spin heavy labour government.
no one will sell as the house is worth less than when they bought it.
Surely most people (usually) sell their houses because they are buying a more expensive ones, in which case, if house prices go down 10% or whatever then that would actually make it cheaper to buy your next house so you'd be more inclined to sell?
Presonally, I dream of a crash in housing prices :thumbs:
I really cannot forsee any decline in prices in the near future. Which sucks because I was hoping to climb the ladder but an 'upgrade' would be just too expensive right now.Thats why I hat ethe term "ladder" because it isn't really is it. The only way that it is a ladder is when it was placed on the floor and people climbed it but now the ladder is being pulled up slowly meaning the bottom rung is getting further and further away from the ground whilst the rest of the rung are no closer either. Still you all end up with incredibly valuable houses that are only worth anything when you sell without having to buy another.
daveb_dvd
05-11-2006, 22:12
You ignore the basic premise of 'the housing market' though, what incentive is there to be a homeowner (and with it all the risks/burdens that entails) if one does not have capital appreciation?
The security of owning a home that you can do with as you please instead of the relative insecurity of renting and being subject to the terms/duration of your tenancy?
One would be better off renting in perpetuity and use monies for other investments/pension/etc. Then you're not potentially at risk of say, the boiler failing and needing to come up with a sizeable chunk of cash quickly, or some other issue that a landlord would be obligated to sort at no financial cost to the letter.
There are many people who favour this style of living as housing is a fairly illiquid investment i.e. time taken from decision to sell a property to proceeds of sale entering your account can be long. Also difficult to sell a portion of your investment without liquidating the whole thing unless you count renting out a room or mortgage equity withdrawal :)
There are so many more creative ways to invest your cash than locking it up in bricks and mortar.
That said, there is the obvious benefit of the huge tax break you get as a homeowner with zero tax due on capital gains against your main residence.
Couple that with the fact that it is probably the only investment that Joe Public has the opportunity to purchase with massive leverage, and combine with easy credit conditions and low interest rates = massive house price appreciation and speculation.
My opinion is that buying a house is generally a good idea unless you happen to buy just before a massive decline (and even then it might not be that bad an idea if it suits your needs long term).
Judging when (not if, as housing is a cyclical market) the decline will occur is the difficult part.
DeadKenny
05-11-2006, 23:41
So let me get this straight, I might be wrong on the subject but in the recent past wasn't an endowment mortgage a popular way to pay?
Am I right in thinking that that way you'd pay off the interest and pay a seperate "insurance" that when it matured would pay off the cost of the mortgage. Now if I'm right we must have a good percentage of home owner who have policies that won't cover the cost of their houses.
To me that sounds like a alot of people who weren't looking to make a financial gain on the property that they were buying but were indeed but a house and paying for it what seemed like a sensible way.
Of course, I might be wrong!
Endowments like that were a case of misselling mortgages. They were popular because of the 80s and 90s culture of investments and advisers stood to make a lot of money by selling endowment policies. They told the buyers that they stood to make money because the endowment would pay the mortgage and likely have spare cash at the end. This was a hugely risky piece of advice, hence why there are many people with endowment shortfalls, and also why there are many companies that have sprung up to sue the people who sold them the policies in the first place.
Wouldn't touch a policy like that with a bargepole myself.
Hamburger3
06-11-2006, 01:06
but your lack of judgment in deciding not to buy is your fault and you should reflect on that rather than sitting there night after night praying for the market to crash...
How the **** is reflecting going to get a house ?
scoooooot1
06-11-2006, 01:13
How the **** is reflecting going to get a house ?
i never said that reflecting would get a house - try reading the posts again, and maybe again if need be...
squeaky took a conscious decision not to buy a house since he "didn't want or need it"...now he's moaning that his lack of judgment has priced him out of the current market - he snoozed and he losed...
richard67
06-11-2006, 07:02
Surely house prices always rise, and rise quite substantially as well or am I completely missing the point here?
If house prices always rose at the rate experienced over the last few years, ordinary mortals would have been priced out of the market decades ago. Historically, they generally hug the inflation curve, but of course in any one moment in time they might be climbing a sharp slope or sliding down the other side. Yesterday's news that England had better prepare itself for a major hike in council tax rates is exactly the kind of information that will chip away at the unjustified optimism that high prices will go on forever and that houses are a great 'investment'.
The security of owning a home that you can do with as you please instead of the relative insecurity of renting and being subject to the terms/duration of your tenancy? Agreed, but for the sake of my philosophical argument with Squeaky the entire tax break/capital gains/profits argument is irrelevant so was purely the comfort/stability bit, and really, for argument's sake, the comfort/stability factor works both ways.
Right here today you might like the neighbours and condition of homes on your street/etc, and occasionally get together in each other's gardens for a bbq or such.
In a year's time you could have new neighbours who are (insert your favourite local epithet for undesirables here), who use their/your garden as an ashtray, and who are doing seemingly neverending refurb work on a rusted out vehicle in their front garden.
A renter moves elsewhere whereas an owner/seller faces financial penalty or concerns/difficulties about selling as it might be difficult to get viewers in/people interested due to the 'visual blight' and/or not be in a position to absorb the buyout penalty in their mortgage to even contemplate doing so.
AdminSpod
06-11-2006, 10:48
There is a lot of speculation that the bank of england might raise interest rates another 0.25% this month or next and quite a few "industry anal-ysts" and "experts" are predicting another 0.5% to 1% in the coming year.
If we end up with another 1% or more by the end of next year that will stuff a lot of the people with mortgages of 5x to 6x salary and that could well be the trigger for a market correction. If that does happen the obvious question is: how big would that correction be?
DVDWotcha
06-11-2006, 11:05
No chance. A small number of repossessions just means property developers will be able to buy them up cheap and and stick them on the rental market. Certainly in my area rental is still strong. When we put an advert in the local paper to sell our house over 50% of calls were from people asking if it was to let.
Interest rates really need to go up significantly before the pinch really hits home. 3-4% I'd say.
Having been in the market recently, I can say there is a shortage of good housing out there and while that remains the case, prices will continue to rise.
daveb_dvd
06-11-2006, 12:55
Agreed, but for the sake of my philosophical argument with Squeaky the entire tax break/capital gains/profits argument is irrelevant so was purely the comfort/stability bit, and really, for argument's sake, the comfort/stability factor works both ways.
I agree with this point, which is why you should always try to buy the worst house in the best area over the best house in the worst area.
If you're really loaded you might even be able to afford the best house in the best area ;)
Still no guarantee over the 'quality' of your neighbours though.
Butch Coolidge
06-11-2006, 13:07
Dunno if this has been posted yet on this thread
http://business.timesonline.co.uk/article/0,,9553-2403982,00.html
Anyway it is stated on this one that
Lenders are also relaxing the rules for buy-to-let borrowers, who can now take out a mortgage even if their rent barely covers their interest repayments. Landlords could be quickly plunged into losses if interest rates rise, as expected.
I am no expert in economy but this appears to me as financial suicide. House prices have triple over the last 10 years in the UK. The sky the limit.
I agree with this point, which is why you should always try to buy the worst house in the best area over the best house in the worst area.
If you're really loaded you might even be able to afford the best house in the best area ;)
Still no guarantee over the 'quality' of your neighbours though.
Nope, one day you can live next to 'saints in waiting' and the next a bunch of ******** :|
We went with "worst internal condition house on one of best streets in a so-so area" :lol:
If we sold now we would bank a decent wedge, but I'd argue the replacing floors, replastering all walls/ceilings, repainting every wall/ceiling, replacing rads/boiler/etc, new doors, etc would cause as profit as the appreciation, as our place was a mid-way done DIY nightmare where we lived in 2 rooms for three months or so for the flooring, plumbing, and a working kitchen to get installed :oh-hum:
DVDWotcha
06-11-2006, 14:28
We went with "worst internal condition house on one of best streets in a so-so area" :lol:
If we sold now we would bank a decent wedge, but I'd argue the replacing floors, replastering all walls/ceilings, repainting every wall/ceiling, replacing rads/boiler/etc, new doors, etc would cause as profit as the appreciation, as our place was a mid-way done DIY nightmare where we lived in 2 rooms for three months or so for the flooring, plumbing, and a working kitchen to get installed :oh-hum:
Exactly what we are going for too, just not looking forward to the long term renovation project. :(
squeaky took a conscious decision not to buy a house since he "didn't want or need it"...now he's moaning that his lack of judgment has priced him out of the current market - he snoozed and he losed...So with that in mind would you say that a 21 year old single bloke should buy a house within the next six months even though he doesn't need or can afford it just so he doesn't "snooze and lose"?
cjanderson
06-11-2006, 15:19
So with that in mind would you say that a 21 year old single bloke should buy a house within the next six months even though he doesn't need or can afford it just so he doesn't "snooze and lose"?
why on earth would anyone buy at 21?
no one i knew and went to uni with bought until late 20s, as thats when we were "settled" in jobs and where we were living,. before that renting was much more preferable as we moved around such a lot and was more flexible.
bridpopper
06-11-2006, 15:22
The idea of 'snooze and lose' is an absolute shambles - the mass media and then general concensus amongst the idiots in this country is that unless you mortgage yourself up to the eyeballs NOW, then in the future you are going to be in some kind of dire straits.
As much as the current bubble is being propped up right now, its all going to come to a crashing halt eventually. BUST always follows BOOM. There aint a single case where that doesnt happen - and the good times right now (that are mostly a lie) will come to an end.
Do you really want to be paying off a 100-200 grand studio apartment or one bedroom flat, or a semi in a moss side housing estate for a large portion of your life.
The sensible people will sit on the fence for now, get themselves solvent or with a chunk of cash ready - and THEN buy when the time is right.
Dont be another bankruptsy statistic.
CJ, thats what he's saying to me. I would've had to buy at 21 as not to "snooze and lose". I simply made the point that I didn't want nor need a house then and instead saved a similar amount of money that I would've spent on my mortgage / bills etc yet some folks here suggest that buying property is the be all and end all. To be honest I think half the posters must be machines because the only one post that has made any human sense so far has been this one (http://www.thedvdforums.com/forums/showpost.php?p=6863589&postcount=97) and that didn't get any response :oh-hum:
MetalGearAl
06-11-2006, 15:31
Buying at 21 is absolute madness - rent and be happy.
bridpopper
06-11-2006, 15:31
Most home owners on here would never admit they have stretched themselves furthern than they wanted to.
Theres too much social pressure to feel 'complete' with that laminate flooring or DFS sofa - or from parents, family and girlfriends/boyfriends that being responsible and grown up is all about signing your life away for the next 25/30 years.
Another problem is. If you are single and renting how do you save up for a deposit. At the moment i am living with my folks as i only pay £200 a month. its not ideal but when i look at my mate who spend £500 a month rent on a one bedroom flat plus his bills and council tax i think this is the only way i can build up my savings for a deposit.
welshmatt
06-11-2006, 15:58
Another problem is. If you are single and renting how do you save up for a deposit. At the moment i am living with my folks as i only pay £200 a month. its not ideal but when i look at my mate who spend £500 a month rent on a one bedroom flat plus his bills and council tax i think this is the only way i can build up my savings for a deposit.
I cant see how you can unless you severely limit your lifestyle. I was lucky that my parents let me live rent free on the provision I actually saved money each month. I put away about £400 quid a month for 18 months until I got my own place, I think I was 24 at the time. Best thing I ever did as I couldn't wait to move out despite having it very easy.
My folks charged me 200 p/m for about 2 yrs from when I ended school until I moved out and then (bless them) handed it all back to me when I moved out as they'd set it aside ....
Had forgotten all about that TBH, was 21 and everything I owned fit in a 9'x10' room :lol:
richard67
06-11-2006, 16:25
No chance. A small number of repossessions just means property developers will be able to buy them up cheap and and stick them on the rental market.
I'm not sure the property developers are out there in numbers any more. The professionals will have done their sums and realised the cost/rental equation just isn't attractive at this phase of the cycle, and amateurs are already over-stretched. Chances are the whole property fever thing will fall out of favour before long and the words 'property' and 'investment' will no longer be spoken of in the same sentence. It depends to an extent on where you live, of course, but there's no easy money to be made out there at current prices. During the eighties property boom a story did the rounds of a guy who bought a flat in York on the Friday and sold it for a massive profit the following week. If it's true, he was extremely lucky, but stories like that fuel people's natural greed and band-wagon syndrome quickly follows. THIS is the real fundamental that's moving the market and like fashion, what people will spend a fortune on this year, they won't be seen dead in next...
Butch Coolidge
06-11-2006, 16:32
a guy who bought a flat in York on the Friday and sold it for a massive profit the following week.
Speculation: buying something on the basis of its potential selling price rather than on the basis of its actual value
I'm not sure the property developers are out there in numbers any more. The professionals will have done their sums and realised the cost/rental equation just isn't attractive at this phase of the cycle
They are in this area of the country.
I have heard figures of 30%-50% of our particular development (400 plus units) being 'investor' owned.
And a lot of those are foreign investors who have a head start on UK residents due to them not having to pay stamp duty.
I know of one guy living here who owns 28 properties (mostly up North) and he has no intentions of selling any time soon.
Another investor owns over 100 properties in Canary Wharf and isn't looking to sell up either.
Perhaps the market is somehwat skewed here due to the very high purchase prices and hence there is a very healthy rental market?
Buying at 21 is absolute madness - rent and be happy.
I wish I bought earlier, my mortgage would be a lot less than it is now and I reckon I'd be in a much bigger house.
cjanderson
06-11-2006, 16:43
I wish I bought earlier, my mortgage would be a lot less than it is now and I reckon I'd be in a much bigger house.
wouldn't it have changed the course of your life? ie commited to staying in one place for the foreseeable future, may have to turn down future job opps or have to sell/rent out.
DVDWotcha
06-11-2006, 16:50
I'm not sure the property developers are out there in numbers any more.
I'm afraid my recent experience disproves your theory. Like I said, we have just agreed sale of our house, and of the people who came to view, roughly 50% were developers. Mostly in the line of house->flat conversions. Some also looking for property to rent without any conversions. We sold to one who wanted temp residence while he develops his existing property.
Additionally, from the advert we put in the paper over half of the enquires were from people looking to rent, not buy our house.
I also have a mate at work who has 16 properties dotted around, so there is clearly still money to be made.
quite possibly it would have - but probably for the better..?
I don't regret buying my first place at 21 - and I'm just moving out norw and going up the ladder a bit, to a bigger flat.
This is one other thing some people don't get.
Lots of people think the 'first rung' of a ladder is the 2 bed flat, then the 3 bed house, then the 4 bed semi, then a detached place with 3 bathrooms etc...
It takes longer than that!!
cjanderson
06-11-2006, 16:55
quite possibly it would have - but probably for the better..?
I don't regret buying my first place at 21 - and I'm just moving out norw and going up the ladder a bit, to a bigger flat.
This is one other thing some people don't get.
Lots of people think the 'first rung' of a ladder is the 2 bed flat, then the 3 bed house, then the 4 bed semi, then a detached place with 3 bathrooms etc...
It takes longer than that!!
suppose it depends on graduate positons versus job from school, graduate jobs tend to be a few years of moving around in a "training company" and then move onto another company (at hefty payrise) to start rest of career. therefore if you restrict yourself to just one place, you may lose out on options later on.
DVDWotcha
06-11-2006, 16:56
I wish I bought earlier, my mortgage would be a lot less than it is now and I reckon I'd be in a much bigger house.
Pretty much every home owner I have ever talked to has said the same thing.
There is only one thing that pushes house prices up and that is a shortage of desirable housing. Desirable houses are not growing on trees, so unless the population of the UK start to die off I really do not see any long term downturns in the market.
suppose it depends on graduate positons versus job from school, graduate jobs tend to be a few years of moving around in a "training company" and then move onto another company (at hefty payrise) to start rest of career. therefore if you restrict yourself to just one place, you may lose out on options later on.
Quite possibly I guess - but it depends on the job... big finance consultancies - yes, you may move around - but not everyones an accountant...
cjanderson
06-11-2006, 17:00
Quite possibly I guess - but it depends on the job... big finance consultancies - yes, you may move around - but not everyones an accountant...
well other graduates i know are in journalism so go to whichever paper has the jobs. or teachers so have moved around a bit.
just saying having a place limits you (to some extent) on what jobs you go for and therefore if we're on about salary mutiples, means you can;t get bigger salary and thus achieve okay mutiples.
DeadKenny
06-11-2006, 18:20
wouldn't it have changed the course of your life? ie commited to staying in one place for the foreseeable future, may have to turn down future job opps or have to sell/rent out.
Owning a house doesn't have to be that restrictive, and besides if you decide to take a job that requires selling up you might get relocation (companies get tax breaks if they offer it as I understand it). From experience of this myself, they'll cover the costs of selling up and pay for rental in your new location whilst you look for your next property.
If you stay in the same location you are still free to trade up to a bigger place. In fact doing it more frequently reduces the price gap between houses so less need to take out huge mortgages.
The idea that buying a house ties you down until you retire is just misleading.
I could even easily sell up my place and go back into the rental market if I liked (though the rent would be twice my mortgage payments). In fact when I sell up to get my next place the plan is to get a short term rent, put stuff in storage, and sell the place empty as it's quicker and easier (neighbour sold theirs within a few weeks of putting it on the market doing a similar thing).
It's okay for me though being in the south east and working in IT as where I live is a perfect base to get jobs. I can move around jobs without really having to move location.
Though problem with buying at 21 is you likely don't have a lot of income. You could buy later and overpay your mortgage and likely get the mortgage cleared in the same time or quicker than if you'd started earlier.
Buying at 21 is absolute madness - rent and be happy.Well, duh! I know that but Scoooot1 is suggesting that I've "snoozed and losed" because that what I didn't do, yet yours and CJ's reaction to my post suggest that he's wrong to say that.
Incidentally, I would've replied to this earlier but I dozed off :lol:
cjanderson
06-11-2006, 18:30
Though problem with buying at 21 is you likely don't have a lot of income. You could buy later and overpay your mortgage and likely get the mortgage cleared in the same time or quicker than if you'd started earlier.
exactly, my salary at 21 was about 15k or so, wouldn't buy anything down south.
richard67
06-11-2006, 18:35
I'm afraid my recent experience disproves your theory. Like I said, we have just agreed sale of our house, and of the people who came to view, roughly 50% were developers. Mostly in the line of house->flat conversions. Some also looking for property to rent without any conversions. We sold to one who wanted temp residence while he develops his existing property.
Additionally, from the advert we put in the paper over half of the enquires were from people looking to rent, not buy our house.
I also have a mate at work who has 16 properties dotted around, so there is clearly still money to be made.
London is a classic example of the 'depends where you live clause'. I don't have statistics to hand, but what are the chances that London carries a huge proportion of the rental market. It's not difficult to understand why and it will probably be the last place the slump hits. If your mate with 16 properties got in early then he's probably making a tidy income. The problem for people looking for BTLs now is that unless they enter the market with a large deposit, the rising cost of borrowing is going to make a profitable margin extremely hard to find. 16 properties is just 16 times the loss of one if you've got your maths wrong.
The idea that buying a house ties you down until you retire is just misleading.
Apart from the fact that each time you move it is another set of fees ie stamp duty, solicitor, removals etc. It doesn't stop you from moving but eats into any "profit" that you make on each property.
Buying at 21 is absolute madness - rent and be happy.
It seems quite sensible to me. Buy as soon as you can, pay off as much as you possibly can and then it will make things easier when you have children in your late twenties. I know several people that bought flats at around 21, they have been able to move on to houses by their mid twenties. We bought at 25 as that was the earliest we were able to afford it, but I wish we could have bought much earlier.
I'm 21, could buy but wouldn't even consider it. The amount of money it costs to move is ridiculous, and at this stage in my life I'm not certain where i'll be in a year's time, let alone over a longer time frame. I reckon you must have to stay in one place for an absolute minimum of 3 years before even considering buying.
At the moment I can save a sizeable chunk a year, and have the freedom to enter the market without a killer mortgage when I settle down, maybe in 5 -10 years.
in the recent past wasn't an endowment mortgage a popular way to pay?
To me that sounds like a alot of people who weren't looking to make a financial gain on the property that they were buying but were indeed but a house and paying for it what seemed like a sensible way.
Of course, I might be wrong!
You are wrong. Many endowment mortgages were sold on the premise that you may be able to pay off your mortgage and have a lump sum left over - ie, make a profit on your investment. Hence loads of people whinging that their investment doesn't cover their mortgage and no hope in sight of this supposed lump sum, despite having been told from the start that investments can go down as well as up, blah blah blah. Had they not been so greedy as to see the £££ they would have go for a more stable option - replayment mortgage. It'll all be in the small print and the vast majority shouldn't be entitled to a thing in my opinion. Greedy, that's all.
Butch Coolidge
07-11-2006, 12:03
Timber !!!! (It's on the DrudgeReport this morning)
http://www.nytimes.com/2006/11/07/realestate/07land.html?ei=5090&en=22b43ceaff41373b&ex=1320555600&partner=rssuserland&emc=rss&pagewanted=print
DVDWotcha
07-11-2006, 12:19
London is a classic example of the 'depends where you live clause'. I don't have statistics to hand, but what are the chances that London carries a huge proportion of the rental market. It's not difficult to understand why and it will probably be the last place the slump hits. If your mate with 16 properties got in early then he's probably making a tidy income. The problem for people looking for BTLs now is that unless they enter the market with a large deposit, the rising cost of borrowing is going to make a profitable margin extremely hard to find. 16 properties is just 16 times the loss of one if you've got your maths wrong.
Most of his properties are in bristol and none of them are in London. But yes no doubt it depends on where you live.
You are wrong. Many endowment mortgages were sold on the premise that you may be able to pay off your mortgage and have a lump sum left over - ie, make a profit on your investment. Hence loads of people whinging that their investment doesn't cover their mortgage and no hope in sight of this supposed lump sum, despite having been told from the start that investments can go down as well as up, blah blah blah. Had they not been so greedy as to see the £££ they would have go for a more stable option - replayment mortgage. It'll all be in the small print and the vast majority shouldn't be entitled to a thing in my opinion. Greedy, that's all.
And you are wrong. My parents took out an Endowment mortgage, and weren't given the full facts, as many people weren't. I can't see how you can call it being greedy.
cjanderson
07-11-2006, 13:00
And you are wrong. My parents took out an Endowment mortgage, and weren't given the full facts, as many people weren't. I can't see how you can call it being greedy.
the only thing greedy is to expect to be put in the same position as if they took out a full repayment at the time.
compensation should just be what you'd get if you paid what you did pay under a full repayment, as you have had the benefit of more cash over the time. Though i think thats how they do calculate compensation
i think thats what "madonna" is getting at.
Cirrus888
07-11-2006, 13:14
And you are wrong. My parents took out an Endowment mortgage, and weren't given the full facts, as many people weren't. I can't see how you can call it being greedy.
My parents were the same they didn't know better and were probably only offered one option at the time.
Timber !!!! (It's on the DrudgeReport this morning)
http://www.nytimes.com/2006/11/07/realestate/07land.html?ei=5090&en=22b43ceaff41373b&ex=1320555600&partner=rssuserland&emc=rss&pagewanted=print
Arizona is/was getting SO over built (folks lived in Sedona until a few yrs ago and sold/moved because it was overcrowded) it does not surprise me at all ...
You are wrong. Many endowment mortgages were sold on the premise that you may be able to pay off your mortgage and have a lump sum left over - ie, make a profit on your investment. Hence loads of people whinging that their investment doesn't cover their mortgage and no hope in sight of this supposed lump sum, despite having been told from the start that investments can go down as well as up, blah blah blah. Had they not been so greedy as to see the £££ they would have go for a more stable option - replayment mortgage. It'll all be in the small print and the vast majority shouldn't be entitled to a thing in my opinion. Greedy, that's all.Fair enough but surely a good percentage of mortgages sold at the time were endowment ones and given that they run for 20-25 years very few people could've suspected that the average house price would rocket as ridiculously as it has. I know that my sister had one on her house that she bought for £39k in 1996.
It makes me feel that all of the ho-ho-ho experts on here bought back then and were lucky and are basing their comments on hindsight rather than what they knew at the time.
neilalford
07-11-2006, 14:46
Fair enough but surely a good percentage of mortgages sold at the time were endowment ones and given that they run for 20-25 years very few people could've suspected that the average house price would rocket as ridiculously as it has. I know that my sister had one on her house that she bought for £39k in 1996.
It makes me feel that all of the ho-ho-ho experts on here bought back then and were lucky and are basing their comments on hindsight rather than what they knew at the time.
The value of the house now isn't relevant to endowment mortgages, the purchaser just owes whatever the house cost when they bought it, not what it's worth now. The main reason that endowment mortgages aren't paying enough to cover the cost is because of the weakness of the stock market a few years back and the poor returns on investments.
So in your example, your sister will owe the bank £39k at the end of her mortgage term, regardless of whether the house is worth £150k or £20k, all that matters is whether the endowment investments she made over the course of the mortgage are worth £39k at the end, if they're worth more she get's a nice lump sum, if they're worth less she has to find the extra money from somewhere.
The value of the house now isn't relevant to endowment mortgages, the purchaser just owes whatever the house cost when they bought it, not what it's worth now. The main reason that endowment mortgages aren't paying enough to cover the cost is because of the weakness of the stock market a few years back and the poor returns on investments.
So in your example, your sister will owe the bank £39k at the end of her mortgage term, regardless of whether the house is worth £150k or £20k, all that matters is whether the endowment investments she made over the course of the mortgage are worth £39k at the end, if they're worth more she get's a nice lump sum, if they're worth less she has to find the extra money from somewhere.Ahh right. I thought it was a case of paying off the interest with one monthly payment and paying another to take care of the lump sum at the end. I knew it couldn't have been right :D
neilalford
07-11-2006, 15:03
Ahh right. I thought it was a case of paying off the interest with one monthly payment and paying another to take care of the lump sum at the end. I knew it couldn't have been right :D
It is, I may have misunderstood the point you were making in your earlier post then, as I thought you were suggesting that higher prices were the reason people were having shortfalls in their endowments, but think I may have misunderstood what you were saying.
It is, I may have misunderstood the point you were making in your earlier post then, as I thought you were suggesting that higher prices were the reason people were having shortfalls in their endowments, but think I may have misunderstood what you were saying.No, you thought right. I imagined that the lump sum payment would reflect the house price at the end of the 20-25 years (or whatever)
I think Neil has clarified now, but just in case - each month you pay all the interest on the loan (for the amount you borrowed) therefore keeping the outstanding amount exactly the same.
You then pay seperately in to an investment pot, the idea being that it would be worth £39K and then some at the end of the mortgage term. So you could pay it off and have a bit of profit. This was based on the idea that shares are a good investment over a long term, ie 25 years. Unfortunately they ****** up and people couldn't even cover the £39K with their investment pot :(
No, you thought right. I imagined that the lump sum payment would reflect the house price at the end of the 20-25 years (or whatever) Well no, the funds you were putting into the endowment were meant to eventually cover the original principal borrowed.
Effectively it was an interest-only mortgage with the separate investment, so while the principal never got paid against over the term it did not grow further either as the borrowing cost was being covered.
The 'shortfall' is that the endowment did not grow sufficiently to meet the lump sum and/or provide further 'free monies' on top of that (borrow 100k, pay interest + endowment for 10yrs, after 10 yrs you owe/collect the difference between 100k and whatever the endowment/investment grew to)
edit - basically exactly what jamesking wrote :brickwall
How many other consumer markets have seen the price rise like houses have? FFS, you can now get a DVD player for less than a DVD itself!
I've ben thinking about this some more last night. People rightly pointed out that there is a steady supply of DVD players so prices go down, whereas the supply of houses (thouh increasing) isn't increasing as high as the demand.
Even so, prices wouldn't be going up if houses were unaffordable - but they are affordable - and the reason is, because DVD players, etc, are cheaper.
The diminishing costs of buying "luxury" goods as well as essentials like cars etc (car costs in real terms are way cheaper than they used to be), means there is more income "left over". This left over income is always going to be used to gain an advantage in trying to buy the things people really want - homes - so as more and more extra cash becomes available, prices go up and up.
The rise in house prices reflects the decrease in other costs, rather than matches it.
Interesting socioeconomic theory there ... but there's also a much more basic premise involved.
The basic components to make consumer goods become ever cheaper as either more suppliers get involved in making the bits or as technology matures (so that 1 chip does the work of an entire board) and manufacturing costs plummet.
Unfortunately unless someone comes up with a way to wave a magic wand and treble the unoccupied space within a 'hot' area, the more homes that get built, the more expensive the remaining vacant land becomes ...
Economy of scale on one hand, supply and demand on the other.
Unfortunately unless someone comes up with a way to wave a magic wand and treble the unoccupied space within a 'hot' area...
They have - they're called apartment blocks (or flats if you still live in the 60's).
Butch Coolidge
08-11-2006, 12:10
Unfortunately unless someone comes up with a way to wave a magic wand and treble the unoccupied space within a 'hot' area, the more homes that get built, the more expensive the remaining vacant land becomes ...
Economy of scale on one hand, supply and demand on the other.
The increase of price on the house market is a worldwide phenomenon. One theory is that it was due to stock market money reinvested in real estate after the internet crash. Another is the fact that interest rates were never that low creating "virtual cheap money" for everyone.
The German market was not impacted by the increase. One reason is that they usually do not take credit to buy real estate.
Funny you should say that ... I worked for a German Landesbank for seven years or so, and had some interesting discussions along those lines with them over beers. They could not fathom why we would want to saddle ourselves with debt for such an extended period, and I couldn't fathom how two of them had paid rent to the same landlord on the same flat for 10+ years.
The increase of price on the house market is a worldwide phenomenon. One theory is that it was due to stock market money reinvested in real estate after the internet crash. Another is the fact that interest rates were never that low creating "virtual cheap money" for everyone.
With increasing rates, property doesn't seem as such an attractive investment and with the FTSE on the increase (hitting a 5 year record yesterday) more people would change where their investments are.
This seems to answer original queston in the negative.
http://news.bbc.co.uk/1/hi/business/6153740.stm
This seems to answer original queston in the negative.
http://news.bbc.co.uk/1/hi/business/6153740.stm
A bit like the tabloid headlines "House prices to be £1million in 15 years" or similar. Complete spin. You only need to check out the MSE forums to see how people are struggling with debt.
Maybe in 15 years the mentality may have changed. "House prices only go up" may have changed to "House prices only ever go down" ala Japan for the past decade.
A bit like the tabloid headlines "House prices to be £1million in 15 years" or similar. Complete spin.
This graph (http://www.housepricecrash.co.uk/forum/index.php?act=Attach&type=post&id=4134) amuses me, and explains why "house prices to be a million by 2014" is just nonsense.
This graph (http://www.housepricecrash.co.uk/forum/index.php?act=Attach&type=post&id=4134) amuses me, and explains why "house prices to be a million by 2014" is just nonsense.
If you take away the edit for the projection, it looks like we are heading for a almighty crash. Guess I'll be buying low and selling high
Erm, that graph doesn't show anything that implies that.
AndyWilson
16-11-2006, 21:21
..and the website it's from is **slightly** partisan!
andybhoy
16-11-2006, 21:28
The thing sis, if there ever is a crash, in 5, 10 or 20 years - all we'll hear is "told you so" from these muppets. Even a stopped clock is right twice a day, and repeating the same thing every day for 50 years, you're bound to be right eventually.
home_bas
16-11-2006, 21:35
'sokay tho, they'll be out of a job like the rest of us when it happens. Crash helps nobody except the mega rich as the economy would nosedive due to credit issues/neg eq.
Prices will eventually have to stabilise (I hope, I want to buy a home) but there's no ways the average house price can possibly be 1mill by then without a massive increase in wages.
Houses are starting to hit the plauteu of affordability. I hope.
I think we'll find out soon enough if the market here is about to crash. I recall last year people were saying the American market was going to shoot even higher and this year we're seeing it crashing.
..and the website it's from is **slightly** partisan!
I'm not saying the website is any good, I'm just saying the graph is amusing ;)
'sokay tho, they'll be out of a job like the rest of us when it happens. Crash helps nobody except the mega rich as the economy would nosedive due to credit issues/neg eq.
A crash within the next year or so would help me quite a lot actually, but I think I may be the exception rather than the rule.
AndyWilson
16-11-2006, 22:32
I lost a lot of money in the last crash - and that was real money, negative equity that had to be repaid when I moved - so I don't really want another one!
Butch Coolidge
17-11-2006, 07:52
This graph (http://www.housepricecrash.co.uk/forum/index.php?act=Attach&type=post&id=4134) amuses me, and explains why "house prices to be a million by 2014" is just nonsense.
This kind of nonsense hapenned in the past. Florida 1920's, Japan in the 80's.
http://www.investopedia.com/features/crashes/crashes4.asp
prices expected to be up 5-6% 1st quarter of next year....
Vulcan101
17-11-2006, 08:14
The RICS press release is rubbish.
A friend of mine was looking to move in the summer, the agents were all telling him his house was worth between £210-220K but that he would only get £190-200k. So when he said "So, it's only worth £200k" all the agents would say "No, it's worth £220k but you will only get £200k). Talking to other people who are moving/have moved recently all recount similar stories.
A few weeks later a couple of identical houses in the street went for £189k and £192k respectively. Instead of moving he did a attic conversion for home office space.
Butch Coolidge
17-11-2006, 08:25
The thing sis, if there ever is a crash, in 5, 10 or 20 years - all we'll hear is "told you so" from these muppets. Even a stopped clock is right twice a day, and repeating the same thing every day for 50 years, you're bound to be right eventually.
http://www.fool.co.uk/news/comment/2006/c061116b.htm
As Mark Twain allegedly said, "The past does not repeat itself, but it rhymes". Hence, whenever I read press releases trumpeting our ever-increasing mortgage debt, I ask myself the same questions: what particular pin will burst this bubble? Will it be rising interest rates? Rising unemployment? Rising personal debts and insolvencies? Who knows, but as sure as day follows night, the house-price bandwagon is going to come screeching to a stop, so watch out for those red warning lights!
I know next to nothing about buying/selling houses or mortgages etc but was wondering if the reason houses are affordable was because the banks & building societies are willing to lend more money? If they turned round and said we'll go back to only lending 3 times your salary would house prices drop because everyone could no longer borrow the money to buy?
There was an good piece in the business editorial in The Times on Monday, echoing the point by one of the MPC members in a speech last week. Whilst globalisation has helped in keeping inflation low and steady, and hence interest rates low and steady, if inflation does gain any traction due to other forces (e.g. wage rises) then the very nature of gloabalisation means that interest rate rises are not as potent as they used to be, and so a quarter point here or there makes little or no difference, meaning substantial rate rises would be needed.
lostboy182
17-11-2006, 09:40
I know next to nothing about buying/selling houses or mortgages etc but was wondering if the reason houses are affordable was because the banks & building societies are willing to lend more money? If they turned round and said we'll go back to only lending 3 times your salary would house prices drop because everyone could no longer borrow the money to buy?
Yep - a case of trying to outdo each other to lend to the "lowest denominator"
An excellent piece from moneyweek.com
"Abbey will now lend up to £1 million per property at 85% loan-to-value…Abbey also has a low minimum rental cover, requiring the minimum rental income to be 120% of the mortgage payments.”
Apparently this “makes buy-to-let more feasible for all types of landlords.” Especially ones who don’t know what they’re doing and are desperate to get on the buy-to-let bandwagon - even if it means borrowing too much and effectively paying their tenants to live in their home.
Here’s what happens every time there’s a bubble. The bubble starts for good reasons - houses are too cheap, so smart investors buy them. House prices soar, the smart investors get rich, and other people dive in. Eventually everyone and their mother-in-law want to buy a house. People start saying things like “You can’t go wrong with bricks and mortar” or “house prices can’t go down - the Government won’t allow it.”
The banks who lend money to these people record better profits than ones which are more careful. Shareholders start asking why their bank isn’t making as much profit as the others. So banks have an incentive to chase more lending business, leading to a “race to the bottom” to see who can attract the least-creditworthy customers.
It’s not as if we haven’t seen this before. In fact the last time was just a couple of years ago. All the bad debts currently being reported by the banks were a result of a similar rush to grab as much unsecured lending business as possible during 2003 and 2004, when interest rates were down below 4%. The banks - not to mention all the press pundits who were strangely quiet about it at the time - now realise they loaned too much to people who couldn’t or wouldn’t pay it back.
But have they learned? Of course not - people never learn. Now they’re doing the exact same with secured lending - and all the pundits are once again arguing that it’s sustainable.
The bigger the boom, the bigger the bust. The property pundits will of course try to draw out the boom for as long as they can. In fact, we wouldn’t be at all surprised if a wave of more negative reports on house prices start to appear, now that the Bank of England has hiked interest rates. Phrases like - “a vulnerable market” and “further interest rate hikes are unnecessary” - are likely to crop up in this month’s wave of property propoganda.
But ultimately, the buy-to-let bubble is all about rocketing debt, not gains in the intrinsic value of housing. Interest rates are now rising, and when lenders finally realise that they’ve made the same mistake with secured lending that they did with unsecured, the excitable press releases will dry up and so will the market.
That’s when the whole thing tumbles into reverse, people desperately try to bail out, and prices go into a long slow slump. Until one day, property becomes cheap again, and smart investors will start looking at the market.
However, as more and more investors jump on the buy-to-let bandwagon, tenants have an increasing number of properties to choose from. That makes it difficult to raise rents.
And at the same time, the rush to buy investment property has kept the housing bubble from popping, as first-time buyers have been replaced by amateur landlords.
Statistics for the second quarter of 2006 from buy-to-let mortgage firm Landlord Mortgages show that annual rental yields on property in England currently average around 5.7% - a four-year low.
The company says that this is partly because “in this competitive climate, landlords are increasingly sacrificing increased rental income to retain reliable long-term tenants”.
And other statistics suggest the true picture could be far worse. ARLA suggests that annual rental yields (after mortgage interest payments and allowing for a 27-day void period) are as low as 0.7%. In other words, buy-to-let investors are losing money after taking inflation into account.
Landlords like this are effectively paying their tenants to live in their properties. If challenged, they will argue that they are in the market for long-term capital gains.
Buy-to-let: an overheated market
This just shows how overheated the market is. Property has traditionally been viewed primarily as an income-generating asset – the idea of subsidising a tenant to live in your property would never have occurred to a professional landlord.
But amateur investors are now treating houses like risky small-cap shares – who cares about the dividend yield as long as the price goes up? The problem is, of course, that homes tend to be a lot more expensive and a lot more difficult to sell than shares.
Even the purveyors of the “property porn” filling our TV screens aren’t exactly coming up with great reasons to invest in the buy-to-let sector.
Property pundits Kirsty Allsopp and Phil Spencer recently gave investors a run down of the top ten best places to invest for buy-to-let. Despite my scepticism, I watched the programme, wondering what out-of-the-way corner of the UK Kirsty’n’Phil had unearthed as the next property goldmine. What was the number one investment location? Oxford.
Yes, it’s a university town full of uncommonly wealthy students, but that’s hardly a revelation. If there are any bargains to be had in Oxford, they’ve long since been snapped up. And that’s the point.
If even property uber-bulls like the Location, Location, Location duo can’t find a better-value place to invest than Oxford, then what hope does an amateur landlord, chasing the crowd, have?"
Councils will be worried. They've sold all the council houses now...
“Property porn”
Brilliant :lol:
Is it a new paradigm yet?
lostboy182
17-11-2006, 11:04
It's a "Giffen good" now - demand goes up as price goes up (inverse Economic theory). Not seen to this extent since the price of potatoes went up, and subsequently so did demand during the Irish potato famine way back when. :dork:
DeadKenny
17-11-2006, 12:50
A friend of mine was looking to move in the summer, the agents were all telling him his house was worth between £210-220K but that he would only get £190-200k. So when he said "So, it's only worth £200k" all the agents would say "No, it's worth £220k but you will only get £200k). Talking to other people who are moving/have moved recently all recount similar stories.
What it's 'worth' is what it's sells for.
All the agents are saying by 'worth' is this is the price they think you should advertise it, because they know the knock down margin is increasing (often by £10k to £20k now), and they want to push prices up as much as possible, given the cut they get from the sale.
Neighbour of mine was told to advertise their house for a price about £30k higher than the average for the area and house type. I thought that was way too high, but still they got £10k less than that advertised price and still getting more than the average, plus it's pushing prices up (e.g. I know I can now advertise my place for at least that as it's a similar house).
This seems to answer original queston in the negative.
http://news.bbc.co.uk/1/hi/business/6153740.stm
This seems to answer it in the positive:
https://registration.ft.com/registration/barrier?referer=http://www.ft.com/home/uk&location=http%3A//www.ft.com/cms/s/58a3cd32-79a3-11db-90a6-0000779e2340.html
This seems to answer it in the positive:
https://registration.ft.com/registration/barrier?referer=http://www.ft.com/home/uk&location=http%3A//www.ft.com/cms/s/58a3cd32-79a3-11db-90a6-0000779e2340.html
what is it they say ? get 1000 economists in a single room and you will get 1000 different opinions :nono:
personally I have bought another 2 apartments for let, if you take the long term, as I do, then you should be fine.
joconnor
22-11-2006, 19:15
Seems to me that all the data points to market growth slowing and in worst case scenario levelling off. Nothing points to prices actually dropping.
Even if the markets does indeed drop slightly, there's a lot of FTB out there who will jump in and buy at these 'lower' prices thus pushing the market back up.
Even if the markets does indeed drop slightly, there's a lot of FTB out there who will jump in and buy at these 'lower' prices thus pushing the market back up.
But who buys in a market where prices are falling? If people think they are likely to get something cheaper by waiting (especially something as expensive as a house), they will sit it out.
NicolaUK
22-11-2006, 20:21
But who buys in a market where prices are falling? If people think they are likely to get something cheaper by waiting (especially something as expensive as a house), they will sit it out.
Sit it out like those that did in the past that now regret doing so?
Sit it out till when exactly?
Sit it out like those that did in the past that now regret doing so?
Sit it out till when exactly?
When prices are falling, people have nothing to lose by waiting do they? Certainly, the market psychology would drastically change. People will start to realise that waiting a while could mean being able to afford an extra bedroom, or a house in a better area, for example. That's if people don't completely go off the idea of buying a house for fear of landing themselves in negative equity...
Everyone likes to think they're getting value for money and if the commonly held perception of housing as an investment changes to the view that you could lose out significantly by buying a house at a certain point in time, the impact on the market would be significant.
Price rises have in the last five years been extraordinary, pretty much on the back of looser lending by the banks and speculation by the BTL crowd/property developers. However, if the market is supported by neither, as is likely to be the case in a falling market (banks would certainly look at how much they lend when the asset you put up for security is reducing in value), lower prices will surely be the result.
This scenario isn't here yet, but is a real possibilty.
stillill
22-11-2006, 22:27
Sit it out like those that did in the past that now regret doing so?
Sit it out till when exactly?
Til you want to buy and are happy to stay in the same property until you can afford to move up, maybe in 5 years time. (If you can save anything on top of the mortgage payments)
Or get it now -- before it's too late!!!11111!
Spitting image (http://www.youtube.com/watch?v=2t8YTvdYXws) did a good spoof of the last housing crash :lol:
Spitting image (http://www.youtube.com/watch?v=2t8YTvdYXws) did a good spoof of the last housing crash :lol:
Genius :lol:
From today's FT, in the Comment section:
The housing boom will end, but how?
Financial Times, Friday November 24th, 2006
For the British, houses are as much gold mines as mere dwellings. Over the past 10 years, real house prices have doubled, while real disposable incomes have risen only 29 per cent. Ratios of house prices to incomes and rents have, as a result, reached all-time highs. Housing made up as much as 53 per cent of the total wealth of UK households in 2005, against 39 per cent a decade before. Can this last? No. Will it end with a bang or a whimper? That is indeed the big question. Given this, what are we to make of a prediction that 'sharp falls in real house prices may not come for a year or so, but come they probably will' (emphasis in original)? We should take it seriously, particularly since David Miles of Morgan Stanley, the lead author of the report in question ('UK Housing: how did we get here?'), is an erstwhile adviser on housing finance to Gordon Brown.
The study estimates a simple model in which prices depend on average incomes per head, the size of the population and the real cost of home ownership. The last, in turn, depends on real house prices, interest rates and other housing costs (such as depreciation, repairs, insurance and taxes). But, above all, it also depends on expected changes in house prices. The more house prices are expected to rise, the cheaper the effective purchase price also becomes.
This last point is central. If people's expectations of future price increases are affected by their recent experience prices will tend to overshoot fundamentals: this is just how bubbles form. In the Morgan Stanley analysis, people's expectations of future price rises are affected by both recent experience and the belief that there is some long-run average rate of house price inflation towards which the current rate will converge.
The analysis then gives two interesting results. First, it does explain the doubling of real prices over the past decade. Second, changes in expected prices explain a very large proportion of those increases.
In one specification, higher incomes per head would have generated a 28 percentage point real price rise on their own, rising population would have generated a nine percentage point rise and the reduction in real interest rates would have generated a further 14 percentage point rise. All the rest (62 percentage points) was due to changes in expected prices.
But a specification that includes the increase in supply of new housing reduces the impact of price expectations to 39 percentage points.
None the less, the conclusion is clear: what we are seeing is, in significant measure, an overshoot of fundamentals, in which house prices are being lifted by their own bootstraps. In other words, people now buy houses at historically unprecedented prices because experience has taught them to expect those prices to go ever higher. This analysis then depends on the assumption that expectations are 'adaptive': instead of expecting prices to fall when they have risen, people expect them to rise still further.
An implication of this approach is that the amplification of price movements works in both directions. At some point the real cost of housing will bring price appreciation down. When that happens adaptive expectations will go into reverse and so generate price falls.
The study's conclusions then are that declines in prices are plausible. But predicting timing is impossible since that depends on precisely how expectations are formed, which, inevitably, we do not know.
So how disastrous would such falls be? On this the study is sanguine. It argues that the impact on consumption is modest, in both directions, because higher prices make purchasers worse off to the same extent as they make owners better off.
The big point is that higher house prices cannot make society as a whole better off. They merely redistribute income from the young to the old, which is socially destructive. If, in addition, there is an element of overshooting, that will prove particularly costly to those who turn out, retrospectively, to have bought at the peak. For these hapless people, it would be far better if price overshooting had never happened.
The model is not invulnerable to criticism. It is entirely in real (that is, inflation-adjusted), rather than nominal, terms. Yet lower nominal interest rates make purchasing appear more affordable, because the annual cash outlay falls. Affordability, thus measured, does remain below levels reached in the early 1990s, when interest rates soared and house prices crashed. That is surely one reason for higher demand and so prices.
The implication of this is that prices may stay high. But it also means that purchasers may have contracted to pay a far higher real amount than they realise. If so, this will prove a painful long-term burden upon them.
The question, above all, is not whether the boom will end, since it must, but how. Will real prices stabilise, or fall? I suspect that the answer will indeed be the latter. But, as the study notes, nobody can possibly know when or by how much.
The big point is that higher house prices cannot make society as a whole better off. They merely redistribute income from the young to the old, which is socially destructive. If, in addition, there is an element of overshooting, that will prove particularly costly to those who turn out, retrospectively, to have bought at the peak. For these hapless people, it would be far better if price overshooting had never happened.
Isn't that similar to a pyramid scam? And once the buyers dry up ...
jon smith
21-05-2007, 09:10
Sit it out till when exactly?
Since last November house prices round here have risen by about 10%.
This is with mortgage rate increases and extra supply (people getting in before the HIP). I think someone said it on one of the other threads, demand currently still outstrips supply - this is not the model for a crash.
I've I don't buy a 2 bed mid terrace now, I may be stuck in my one bedroom flat for the next 5-10 years (or more).
frazclay
21-05-2007, 09:37
Isn't that similar to a pyramid scam? And once the buyers dry up ...
what may happen is that no body will be willing to lose money they expected to make on there property
and thus will stop selling when the buyers can no longer afford to buy.
thus the market will stagnate and he only movement will be scavengers picking off reposessions at auction.
then the bank of england may drop rates to kickstart it back into motion.
who knows - I just don't expect there will be a 'crash' in prices just a
crash in the estate agents business.
it redistributes money from young to old until the old die then it redistributes back minus inheritance tax.....
ryonhilluk
21-05-2007, 09:57
Plenty of houses round here are up for sale. Ours is up at 290k (we bought it for 70k in 1999), only had a couple of viewings in 3 weeks even though its a lovely house in a great area.
Parents hoping to sell this as they are currently looking at (much cheaper) houses in Spain, and have money left over to buy a much cheaper house round here to rent out as student accomodation (and as a backup plan if they come back)
The way its going i can't ever see me wanting to buy a house in this country. The prices are extortionate! I'd rather move abroad than get saddled with debt over here!
Its crazy, really is.
home_bas
21-05-2007, 09:59
Interestingly it was reported on FiveLive this morning that the head of Foxtons is to sell to venture capitalists...
I don't expect to see a crash soon purely due to the demand/supply equation, but it was interesting to find out. Could be either:
- needs more investment for expansion, so sell out
- made enough money, so sell out
- fears about future sales stagnation, so sell out
It will be interesting to see the demand/supply model when things get to expensive. There will always be demand for housing, but if people can't afford the prices who knows what will happen.
Rental yields are lower than mortgage costs so buy-to-let is out unless you are banking on equity growth, mortgages are approaching 50% of income, so who knows what will happen next...
Still torn between sitting out and never having the prospect of my own place in later life if prices increase, or mortgaging myself to the hilt and wrecking my life!
Not a fun decision to take at the mo. :(
Nebiroth
21-05-2007, 10:07
it redistributes money from young to old until the old die then it redistributes back minus inheritance tax.....
Indeed, and IHT has ballooned so much that it is entirely possible that the property will have to be sold to meet the bill it generates. Hardly "redistributive", unless one counts the taxman.
Assuming, of course, that the property hasn't been snatched away to pay for care fees.
don't know about the rest of the country but the demand in parts of London still massively outweighs the supply, mainly due to foreign influx/ investment, this has led to prices continuing to rocket. Have been renting for a year now and looks like it will stay that way for a while. If you bear in mind that people are still paying £300/week to live in a place valued at £550k it makes sense. I would prefer to get involved in BTL abroad.
was watching a program yesterday and some woman had a property portfolio of 700 homes, somewhere in the south of England, near an international station.
Was ridiculous, she was literally buying whole streets for Buy-to-let, in fact on-camera while driving through the streets she said "from here on, all these houses belong to me".
Sickens me to an extent - especially when there are people who can't afford to own one house and these people are further increasing all the house-prices in an area. There are just some things I don't like people having a monopoly on, and housing is one of them, I think everyone should definitely have an oppurtunity to buy affordable housing.
There should be certain types of housing and estates that these people should not be allowed anywhere near to buy and profits on the houses should be kept to a bare minimum.
sideshowbob
21-05-2007, 10:25
I've read some sorry stories (http://www.bbc.co.uk/insideout/southwest/series11/week7_repossession.shtml) of repossessed houses from around the country being sold cheaply in London only to be resold locally for thousands more within weeks. In these circumstances, the banks and building societies seem to be handing an easy buck to the opportunist with handy cash and adding insult to injury by leaving those who've had their home repossessed further in the ****.
I think anyone who thinks that the first time buyer will be the first to benefit when houses are repossessed is living in la-la-land.
surfer_chicky
21-05-2007, 10:33
On a front page of a news paper saturday was the head line 'houses to rise by 8%'
On a front page of a news paper saturday was the head line 'houses to rise by 8%'
If that was the Times it read 'Interest Rates to rise to 8%'. Which was one prediction from many but the others didnt sound as exciting.
anyone who has a property portfolio has my respect for taking the risk in the first place (if there ever was one). If things go wrong and properties are repossessed, the debt doesn't disappear, it'll follow the person responsible.
If that was the Times it read 'Interest Rates to rise to 8%'. Which was one prediction from many but the others didnt sound as exciting.
Not going to happen.
Interest rates at that level would cause an unprecendented level of repossessions, in addition to radically changing unsecured borrowing rates, and would cause personal finances to go into utter meltdown for a large proportion of the population.
And the one thing that many of the house price debates seem to utterly ignore (and devalue themselves by doing so) is the impact that such an interest rate rise would have on industry. Banks lend in a range based on LIBOR, plus usually between 50 and 200 basis points (0.5% to 2%). If LIBOR went up by over 2%, the impact on UK business would be devastating. The government and Bank of England will never sanction rates rises to that degree, as the ensuing economic downturn would be massive, and virtually uncontrollable. Plus, having interest rates that were massively out of line with the Eurozone, the US and other major countries that do business with the UK could damage our ability to compete on a level playing field.
And finally, current surveys of banks and lenders indicate that rates are still expected to fall in the medium to long-term, and that the likely peak will be no higher than 5.75%. Even if they are wrong, the likelihood of them all being wrong to that extent is pretty small.
KennyVader
21-05-2007, 11:03
was watching a program yesterday and some woman had a property portfolio of 700 homes, somewhere in the south of England, near an international station.
Was ridiculous, she was literally buying whole streets for Buy-to-let, in fact on-camera while driving through the streets she said "from here on, all these houses belong to me".
Sickens me to an extent - especially when there are people who can't afford to own one house and these people are further increasing all the house-prices in an area. There are just some things I don't like people having a monopoly on, and housing is one of them, I think everyone should definitely have an oppurtunity to buy affordable housing.
There should be certain types of housing and estates that these people should not be allowed anywhere near to buy and profits on the houses should be kept to a bare minimum.
I don't know why an entrepeneur would sicken you. She's basically just running a housing association. A large corporation doing the same and syphoning all the profits offshore would be much worse surely.
Your angst should be directed at the local authority and the government for not building enough new social housing and instead selling off what stock they do have.
I'm seeing a lot more stories on the internet about 'why won't my house sell?' with ludicrous replied such as 'repaint','need more flowers', 'replace curtains' etc. How about its over priced and the reason its not selling is that we are at the top of the market.
I don't think there's ever been a boom without a bust. The soft landing mantra was said during the last housing boom as well.
frazclay
21-05-2007, 11:53
anyone who has a property portfolio has my respect for taking the risk in the first place (if there ever was one). If things go wrong and properties are repossessed, the debt doesn't disappear, it'll follow the person responsible.
I would say that any one with any sense would 'own' the properties through a limited company thereby getting some protection if the income from said properties falls to where they are unsustainable.
I'm seeing a lot more stories on the internet about 'why won't my house sell?' with ludicrous replied such as 'repaint','need more flowers', 'replace curtains' etc. How about its over priced and the reason its not selling is that we are at the top of the market.
I don't think there's ever been a boom without a bust. The soft landing mantra was said during the last housing boom as well.
the bank of england can and will adjust interest rates to avoid a repeat of the early 90s
the way it should be tackled in my opinion for someone who has not stepped on the ladder yet is :
1) Buy something, obviously something on which you can afford payments
2) Try not to pay much over the recent sale of a similar property - can be checked online easily these days
The two likely scenarios are now the market keeps going up, or we get some sort of correction.
If Mkt continues upwards: The property you bought should also rise. Therefore the move in price of the larger property you want to move in to has been offset to a degree by the rise in price of your current one.
If Mkt moves down: Yes, you lose money in your current property. However, the maybe larger property you originally wanted to buy has dropped in price to offset (more than offset probably) the drop in your smaller one.
Does this make sense to you guys?
I think thats the way to play it.
So long as you don't go into negative equity in a big way from the start, you are pretty safe.
cjanderson
21-05-2007, 15:25
Indeed, and IHT has ballooned so much that it is entirely possible that the property will have to be sold to meet the bill it generates. Hardly "redistributive", unless one counts the taxman.
Oh :cry:I will not get a full 500k property from mummy and daddy, but cash of £420k :cry:
still average joe
21-05-2007, 15:36
Is it not too simplistic to talk about house prices in the UK as a whole.
Im certain there are some areas where prices are going to fall but there will still be other areas where prices keep rising. I have three properties and while the flat in edinburgh has hardly incresed in value over the last 3 months the two properties in the Borders have gone up by between 10-30% (depending on which report you read)
Swings and roundabouts. But Im not worried, in it for the long hall.
the bank of england can and will adjust interest rates to avoid a repeat of the early 90s
In 2005 the BOE reduced IR rates. This led to another mini boom with people thinking the Govt will never let house prices crash. We're paying for that mistake now. IR rates don't have to shoot up by much to get the same effect of the early 90s as the debt is much, much more.
Besides, look at the American housing market - crashing. Spain is following, Ireland isn't looking too healthy.
People need to get off the idea that 'house prices only go up'. They come down as well leaving a lot of people in a lot of pain. History proves it.
frazclay
22-05-2007, 07:36
In 2005 the BOE reduced IR rates. This led to another mini boom with people thinking the Govt will never let house prices crash. We're paying for that mistake now. IR rates don't have to shoot up by much to get the same effect of the early 90s as the debt is much, much more.
Besides, look at the American housing market - crashing. Spain is following, Ireland isn't looking too healthy.
People need to get off the idea that 'house prices only go up'. They come down as well leaving a lot of people in a lot of pain. History proves it.
the american market isnt really comparable with ours as there sub prime market is the cause of there woes.
we don't have such a thing - and its huge over the pond.
I have to agree that the idea of ever increasing house prices over a short term is flawed - however,as i said, stagnation is the more likely scenario than outright crash as people wont wish to lose money on there house.
and history proves that over longer periods house prices do nothing but rise.
You will see that those with high unsustainable unsecured debts have now got the IVA option rather than losing there home as they may have done in the past.
what i think you will see is a massive growth in house rental companies with property counts rivaling the council stocks of old and housing associations. these will be constantly eating up the lower value housing and thus reducing the chance of newer entrants to the property ladder.
we will be heading back towards to an old fashioned structure with large numbers of the populations renting off private landlords and home owners staying put for longer periods as trading up will become more and more difficult - with a larger and larger divide between owners and non owners.
What of the social impact - with private landlords being able to cherry pick there tenants from an ever growing number of those unable to buy - thats a different topic.
the american market isnt really comparable with ours as there sub prime market is the cause of there woes.
we don't have such a thing - and its huge over the pond.
I have to agree that the idea of ever increasing house prices over a short term is flawed - however,as i said, stagnation is the more likely scenario than outright crash as people wont wish to lose money on there house.
and history proves that over longer periods house prices do nothing but rise.
You will see that those with high unsustainable unsecured debts have now got the IVA option rather than losing there home as they may have done in the past.
what i think you will see is a massive growth in house rental companies with property counts rivaling the council stocks of old and housing associations. these will be constantly eating up the lower value housing and thus reducing the chance of newer entrants to the property ladder.
we will be heading back towards to an old fashioned structure with large numbers of the populations renting off private landlords and home owners staying put for longer periods as trading up will become more and more difficult - with a larger and larger divide between owners and non owners.
What of the social impact - with private landlords being able to cherry pick there tenants from an ever growing number of those unable to buy - thats a different topic.
It is estimated that subprime mortgages accounted for 8% of the UK market in 2005.
Source: FT (http://www.ft.com/cms/s/38a15288-efa6-11db-a64e-000b5df10621.html)
vBulletin® v3.8.5, Copyright ©2000-2012, Jelsoft Enterprises Ltd.